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Wilfrid Laurier University School of Business & Economics
September 16, 2014
Canadian Excellence

Dr. Sourav Ray

Date: Friday Oct. 25, 2013
Time: 1:30 - 3pm
Location: P3207
Dr. Sourav Ray (McMaster University)
Topics: When Market Leaders Leave Their Tier: Asymmetric Pricing in Online Sales of High Technology Products

Market leading firms’ ability to afford large price premiums is often regarded as the key to sustain their profitability.  In contrast, we argue that in high tech markets under certain circumstances, large price premiums and market power can actually motivate a market leader to abandon their high price premium tier and price at a much lower level. This greater propensity to drop rather than raise prices would be an example of (negative) asymmetric pricing behavior. Using data collected from a popular shop ‘bot, we examine 475,866 prices and 51,260 price changes for 810 high-tech products from 26 vendors over 283 days and find evidence to support our arguments. This research adds to the discussion of price rigidity, market friction and tiers by demonstrating that, in high-tech industries, drastic price cuts from market leaders that go beyond barriers to entry and loss leading can be a desired strategy.

Keywords: Asymmetric Pricing, High Technology Products, Marketing, Competitive Strategy, Online Sellers, E-Commerce