The Price Is Right

The Internet is a vast repository of information and services.  A great commercial promise is the facilitation of electronic shopping, as virtually everything can now be purchased online.  For any given product, there may be multiple vendors.  The Internet is useful to the extent that intelligent agents, sometimes personalized, can locate the 'best' deal for shoppers.  We use a pair of quote marks around 'best' because that surely must depend on individual choice.  Different people will value different attributes --- price, quality, delivery, warranty, shipping charges, reputation, etc.

Among the product attributes, it would seem that price should be important.  For a standardized product (e.g. a software package such as Microsoft Office), other things being equal, why would anyone want to pay more?  In pre-Internet days, the cost of searching for the lowest priced vendor may make it not worthwhile.  But with Internet-enabled shopping agents, it is easy to find the cheapest deal.  But how important is price for consumers? 

We will now cite some data from the TGI Brasil study.  This is a survey of 10,624 persons between the ages of 12 to 64 years old interviewed during 2002.  Within the survey, the respondent were shown the statement "I look for the lowest price when I shop."  52% of the survey respondents said that they completely agree with the statement.

In the next chart, we show the incidences by age/gender groups.  The pattern is not totally regular in the sense that a monotonic relationship is not present, but there is a hint that the youngest people are least concerned about price and the oldest people are most concerned.

(source: TGI Brasil)

In the next chart, we show the incidences by socio-economic level and education.  Here, the trend is obvious as the incidence decreases with increase in socio-economic level and education.  

(source: TGI Brasil)

The survey question here is a generic one and does not refer to any specific situation.  When a product is priced cheaply, it would stand to reason that a rich person would not bother to spend additional time and travel to find the lowest price.  But this does not imply that the rich are totally price insensitive, with the example being the legendary horde of Brazilian shoppers for luxury goods in southern Florida.

(posted by Roland Soong, 6/23/2003)

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