CHAPTER TEN
PRICE: THE ONLINE VALUE
Multiple Choice
1. Broadly speaking, the definition of price includes all of the following values except
________.
a. money
b. time
c. physical cost
d. psychic cost
2. ________ refers to the idea that both buyers and sellers can view all competitive prices for
items sold online.
a. Price transparency
b. Dynamic pricing
c. Online pricing
d. None of the above
3. All of the following are cost savings enjoyed by shoppers online except ________.
a. the internet is convenient
b. the internet is fast
c. shipping costs are reduced
d. integration saves time
4. The phenomenon that some people may actually pay a higher price for auctioned products
than they would pay an online retailer is known as ________.
a. seller control
b. buyer control
c. dynamic pricing
d. the winner’s curse
5. ________ power is based largely on the huge quantity of information and product
availability on the Web.
a. Buyer
b. Seller
c. Market
d. All of the above
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6. ________ is the most common profit-oriented objective for pricing.
a. Competition-based pricing
b. Dynamic pricing
c. Current profit maximization
d. Segmented pricing
7. Which of the following attributes of the internet puts upward pressure on prices?
a. online customer service
b. affiliate programs
c. customer acquisition costs
d. all of the above
8. Which of the following attributes of the internet puts downward pressure on prices?
a. distribution
b. price dispersion
c. self-service order processing
d. all of the above
9. All of the following are types of markets recognized by economists except ________.
a. pure competition
b. oligopolistic monopoly
c. monopolistic competition
d. oligopolistic competition
10. A market is truly efficient when customers have equal access to information about
________.
a. products
b. prices
c. distribution
d. all of the above
11. ________ refers to the variability of purchase behavior with changes in price.
a. Price elasticity
b. Price transparency
c. Dynamic pricing
d. Competition-based pricing
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12. Which of the following are possible explanations of online price dispersion?
a. delivery options
b. time-sensitive shopping habits
c. switching costs
d. all of the above
13. Which of the following is true with regard to electronic money?
a. It can be used only in online transactions.
b. It has been widely adopted in other countries, but not in the United States.
c. It is also called e-money or digital cash.
d. Both b and c.
14. In general, marketers can employ which of the following types of pricing strategies both
online and offline ________.
a. fixed pricing
b. auction pricing
c. dynamic pricing
d. all of the above
15. ________ and ________ are types of fixed pricing strategies.
a. Price leadership; promotional pricing
b. Price leadership; negotiation
c. Promotional pricing; segmented pricing
d. Negotiation; segmented pricing
16. ________ pricing uses the internet properties for mass customization, automatically
devising pricing based on order size and timing, demand and supply levels, and other
preset decision factors.
a. Promotional
b. Auction
c. Segmented
d. Negotiated
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17. In order to avoid upsetting customers who learn they are getting different prices than
their neighbors, e-marketers should use customer-accepted reasons. These reasons may
include ________.
a. giving discounts to new customers
b. giving discounts to loyal customers
c. adjusting shipping fees due to outlying locations
d. all of the above
18. When using ________ segment pricing, a company may set different prices when selling a
product in different states or regions.
a. value
b. distance
c. geographic
d. market
19. ________ suggests that 80% of a firm’s business typically comes from the top 20% of
customers.
a. The Pareto principle
b. Customer loyalty
c. Value segmenting
d. Dynamic pricing
20. Which of the following customer group is of least value to a seller?
a. A+
b. A
c. B
d. C
21. Buyer power on the internet is the result of all the following except ________.
a. product availability
b. product costs
c. large amount of information
d. willingness of sellers to negotiate
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22. Companies select market-oriented pricing on the internet to ________.
a. maximize profits
b. grow market share
c. increase return on investment (ROI)
d. all of the above
True/False
23. Today’s buyer must be quite sophisticated to understand even the simple dollar cost of a
product.
a. True
b. False
24. The seller’s perspective on pricing includes both internal and external factors affecting
pricing levels.
a. True
b. False
25. The objective of competition-based pricing is to price according to the company’s costs or
demand.
a. True
b. False
26. Price dispersion is the observed spread between the highest and lowest price for a given
product.
a. True
b. False
27. The internet is currently an efficient market.
a. True
28. Menu pricing is the strategy of offering different prices to different customers.
a. True
b. False
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29. In terms of dynamic pricing, negotiation is most often initiated by the seller.
a. True
b. False
30. With value segment pricing the seller recognizes that not all customers provide equal
value to the firm.
a. True
b. False
31. Giving high-value customers the first shot at discounts will reinforce their loyalty.
a. True
b. False
32. In a “flash sale,” a site member may be eligible to purchase a product at a deep discount
for a limited time.
a. True
b. False
33. Online sellers are less willing to negotiate than offline sellers, giving more power to seller.
a. True
b. False
34. A key issue for companies who have an online and an offline presence is how to
coordinate pricing between the two channels.
a. True
b. False
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Essay Questions
35. In the narrowest sense, price is the amount of money charged for a product. However, a
much broader definition of price may be more accurate. What factors are accounted for in
a broader definition of price? Give real life examples of each.
36. There are several attributes of the internet that may allow for cost savings online. Define
and give examples of at least four.
37. Define and distinguish between the four types of markets recognized by economists.
What kind of market is the internet at this time?
38. What factors might explain the wide price dispersion on the internet? In your opinion,
which of these factors has the biggest effect on the spread between online prices?
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39. What are the three types of pricing strategies marketers can employ both online and
offline? Give an example of a Web site that uses each of these strategies.
40. The internet is always considered a low cost option for selling products and services.
From a firm’s perspective what are some factors that add to the expense of doing business
on the internet and why?