Amazon effect study: Cavallo explains how retail pricing has changed

Ted S. Warren/AP Images

• As Amazon has led the online retail revolution, the
  manner in which companies price their goods has been
  permanently changed.
• A new study from Harvard Business School assesses the
  impact of these changes on consumers, as well as the Federal
  Reserve, which watches prices closely when making monetary
  policy decisions.

Over time, it’s become a widely accepted fact that Amazon has pushed retail prices
lower.

The company’s offerings are so diverse that they can afford to
sell many products at razor-thin margins, then make up for it in
other, less competitive areas.

In the process, Amazon forces other retailers to
lower their prices, putting pressure on
their bottom lines. And, in many cases, it’s forced these
competitors to permanently alter their pricing strategies.

But it doesn’t end there. A new study from Harvard Business
School argues that the so-called “Amazon effect” has
increased both the frequency and
magnitude of retail price fluctuations. …

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