An excellent survey from the White House. Useful for teaching. For example:
Even if sellers do not wish to randomize prices across potential buyers at a point in time, it is often possible to collect similar data by raising and lowering prices for all customers over very brief time intervals. For example, if customers who arrive at a website at 10 am face a lower price than those who arrive at 10:15 am, and buy correspondingly more of a given product, the seller has discovered valuable information about the demand curve without technically offering different prices to its customers. To provide an example indicating that this phenomenon happens, the following chart shows two years of prices for a particular children’s toy on Amazon.com. While these frequent price changes are not necessarily experiments, they will certainly provide information about consumer demand for this item.
4 comments
Comments feed for this article
February 11, 2015 at 9:33 am
Andy
I like the sentence that reads, “when big data suggests that a customer is 75 percent pregnant…”
February 19, 2015 at 7:30 pm
avs
I think these price changes are endogenous. Not random at all. Amazon knows when there is more or less demand and optimizes returns.
June 4, 2015 at 5:00 pm
tjungbau
Just wanted to blow in the same horn. Convinced that Amazon’s information on who shops when is pretty good. That makes it however as my predecessor says endogenous and thus price discrimination among customers via time, which is captured in simple IO models.
March 9, 2015 at 9:16 pm
Ali
Nice