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It would be expected that the prices are almost all set centrally with a variation up or down reflecting each stores different costs, for example rent, labour and transport. There is probably a mechanism for a manager to vary some prices reflecting local conditions. There simply is too much work involved in an individual store working out its prices, and in many cases they probably don't know what the cost is.

It is possible that Amazon has reduced prices in line with their standard business practice which is to grow market share at the expenses of profit, in the hope that one day they can set their own prices and make huge profits.


Ken: I think they are referring to varying prices for marketing incentives. In other words, if the store has weekly specials, and certain items are being specially discounted, other items will have prices hiked to pay for those discounts. In a way, some other customers are paying for your discounts. With today's database and data analysis capabilities, it should not be hard to make these computations, but the store would need to have electronic pricing display. Nice optimization problem to figure out how to do this... since pricing affects demand on both the discounted and price-hiked items.

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