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Competitive Pricing Using Data Envelopment Analysis — Pricing for Oscilloscopes

    https://doi.org/10.1142/S0219877016500061Cited by:2
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    Abstract

    The research in this paper proposes a new technique for pricing products in competitive markets taking into account the features and prices of competing product offerings. This technique is based on a methodology known as data envelopment analysis (DEA) and is referred to as competitive pricing using data envelopment analysis (CPDEA). With the development of technology accelerating and new products coming to the market at an ever faster pace, prices of current products are often adjusted based on the state-of-the-art (SOA) technology in the market in order to remain competitive. CPDEA measures the product features that are most important to customers and calculates the performance efficiency values using the DEA method. CPDEA regards price as a performance feature, using this approach the manufacturer can adjust the price in order for a product to reach the SOA frontier and maintain competitive pricing. This research demonstrates the proposed method applied to a popular product category in the test and measurement industry: oscilloscopes. The authors investigated the features of oscilloscopes that are most important to users, then a feature dataset from different oscilloscope models was collected, and the performance efficiency values of the different models were calculated. The product prices are then adjusted in order for efficiency to be as close to 1 as possible which means that the products are considered SOA in the market. In this way, we obtain a more competitive price for the older products, while also setting the prices for the advanced products in a way that captures the value of their additional features.

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