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haggling. Of course, if the seller sets the price too high, no one buys. So there
still remains a system of checks and balances.
Traditional pricing policies were determined from the bottom-up. Companies
determined a cost of the product by factoring in direct and overhead costs. An
appropriate mark-up was then charged, based upon competing pressures and
“what the market could bear” (although rarely was there science to back up that
hoary old phrase).
Now we are at the beginning of the Digital Revolution. Dynamic pricing is
becoming more practical.
Auctions are an interesting and efficient, non-fixed, pricing system. Sellers put
an item up for sale and buyers bid upon it.
Used to be that you had to displace yourself and meet at a fixed time at a fixed
place to participate. Not any more -- at eBay and hundreds of other sites, you
can bid and sell 24 x 7 x 365. And auctions can also happen in reverse --
buyers say what they need and sellers submit competing quotes, an
increasingly popular B2B application on the Net.
And not only can you have “reverse auctions,” you can have reverse fixed
prices. Customer submits the fixed price that she is willing to pay. Company
meets that price or not, but there is no negotiating or bidding. Priceline.com is a
great example... “Name Your Own Price... and Save!”
And, companies like Mercata.com use group buying power to drive prices down
-- the more people who want to buy something, the lower the price. They call it
“PowerBuy™ group purchases -- time-limited buying opportunities in which the
price drops as more people decide to buy.” It even has a formal name...
demand aggregation. Ugh.
Of course, the ultimate in flexibility are full, two-way markets like the stock or