Retail Pricing on the Internet

During the past 30 years or so, electronic retailing (or e-commerce) has revolutionized the practice of retailing and the ways consumers interact with retailers. The growth in e-commerce can be attributed to several factors coming together. Although the history of e-commerce can be traced back to 1984 with the establishment of the electronic mall by CompuServe, the launch of Netscape Navigator in 1994 made e-commerce of today technologically feasible. E-commerce got a major boost in 1995 when Amazon and e-Bay launched online marketplace through which third-party vendors (e.g., resellers, entrepreneurs, publishers, etc.) could sell their products by paying a commission. Alibaba followed suit in 1999 and now has a significant presence in the e-commerce marketplace in the world. The launch of PayPal in 1998, an e-commerce payment system, made it possible for customers to buy and sell products online. With the introduction of broadband in the early 2000, not only did online sales increase manifold it also increased customer engagement in search for products and prices without visiting a physical store. Not having to pay taxes gave e-commerce an edge over B & M retail. Finally, widespread availability of mobile services in 2010 as well as the growth of social media platforms such as Twitter, Facebook, and Instagram helped monetizing customer clicks of electronic sites and online advertising, and stimulated commercial transactions across different platforms. A related outcome of the growth in e-commerce is the production of unprecedented amount of data that are now being used to develop predictive algorithm for automating pricing and other related decisions…