| The term electronic commerce (or e-commerce) has become synonymous with the execution of business transactions via the World Wide Web. Several interesting business and technology problems have emerged with the rapid growth of e-commerce. Businesses that have embraced e-commerce must cope with the challenges of new business models and technologies. Pricing is one of the central aspects of a business model. It is vital to the success of any business. The e-commerce environment is a fertile ground for innovative pricing models.; The goal of this research effort is to identify and study pricing problems in the e-commerce context. Three pricing problems are studied: (a) dynamic pricing of home delivery for online grocers, (b) pricing of online advertising, and (c) pay-per-click search phrase auctions.; For the home delivery problem, I develop a Markov decision process-based pricing model that recognizes the need to balance utilization of delivery capacity by the grocer and the need to have the goods delivered at the most convenient time for the customer. The model dynamically adjusts delivery prices in different time windows as customers arrive and make choices. I show that online grocers can gain significant benefits from implementing such a dynamic pricing model to manage demand.; In the online advertising context, I develop a game-theoretic model of advertising on a website and explain the role of the two most popular pricing models, CPM and CPC. My analysis provides insight on this contentious issue and allows managers to make informed pricing decisions. The analysis of this problem reveals that the choice of a particular pricing model is determined by a complex interplay of technology and market parameters.; Finally, I develop a theory of bidding in search phrase auctions with two symmetric advertisers. This theory provides a framework of bidding in these auctions for advertisers. Since I provide insight into how advertisers behave in these auctions, search engine companies can also equally benefit from this model. One of the most unexpected results, here, is that bidding wars believed to be a signal of competition in many circles create tacit collusion in these auctions. |
