Dynamic Pricing Recognition on E-Commerce Platforms with VAR Processes

• Main Authors: Alexander Faehnle, Mariangela Guidolin
• Format: Article
• Language: English
• Published: MDPI AG 2021-03-01
• Series: Forecasting
• Subjects: dynamic pricing; e-commerce; VAR process; price competition; lasso penalization
• Online Access: https://www.mdpi.com/2571-9394/3/1/11

In an environment such as e-commerce, characterized by the presence of numerous agents, competition based on product characteristics is a very important aspect. This paper proposes a model based on vector autoregressive processes (VAR) and Lasso penalization to detect and examine the dynamics that govern real-time price competition in electronic marketplaces. Employing this model, an empirical study was performed on the price trends of smartphone models on the major electronic sales platforms of the Italian market. The proposed model detects real-time price variations in single vendors, based on the variations of their direct competitors. The statistical method adopted in this analysis may be useful for e-commerce companies that conduct market analyses of competitors’ pricing strategies.