--- title: Why Price Monitoring in Ecommerce Increases Everyone's Pricing Power description: Research finds that price monitoring by ecommerce firms increases the price level in the industry rather than lowering it. image: http://blog.pricebeam.com/hubfs/Blog/pexels-photo-340152.jpeg --- [Skip to content](https://blog.pricebeam.com/why-price-monitoring-in-ecommerce-increases-everyones-pricing-power#main-content) [![PriceBeam](https://blog.pricebeam.com/hs-fs/hubfs/lead-flow-images/PBLogoTransparent%20(1).png?width=400&height=100&name=PBLogoTransparent%20(1).png)](https://www.pricebeam.com/) - Solutions ![RGM360](https://blog.pricebeam.com/hs-fs/hubfs/RGM360_Headlines.png?width=319&height=255&name=RGM360_Headlines.png)[PriceBeam RGM360](https://www.pricebeam.com/rgm360) is an end-to-end Revenue Optimization Platform, offering unmatched value by integrating market research, internal data with AI and next-generation simulation and optimization tools. 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[Newsletter](https://www.pricebeam.com/newsletter) - [RGM Pulse Survey 2026](https://www.pricebeam.com/rgm-pulse-survey-2026) - About - [Company](https://www.pricebeam.com/about) - [News & Events](https://www.pricebeam.com/news) - [Partners](https://www.pricebeam.com/partners) - [Press](https://www.pricebeam.com/press) - [Careers](https://www.pricebeam.com/careers) - [Contact](https://www.pricebeam.com/contact) ![Search icon](https://5018647.fs1.hubspotusercontent-na1.net/hubfs/5018647/Design/Icons/Font%20Awesome/search.svg) [All posts](https://blog.pricebeam.com/all) May 23, 2017 # Why Price Monitoring in Ecommerce Increases Everyone's Pricing Power ![Picture of PriceBeam](https://blog.pricebeam.com/hs-fs/hubfs/Images/PBLogoBadge240x240.png?width=50&name=PBLogoBadge240x240.png)   PriceBeam  ·  1 minute read ![price monitoring](http://blog.pricebeam.com/hs-fs/hubfs/Blog/pexels-photo-340152.jpeg?width=770&name=pexels-photo-340152.jpeg "price monitoring") In previous blog posts, we touched upon all the possibilities online retailers have when it comes to pricing, most notably their ability to price dynamically and apply sophisticated algorithms that recognize patterns in customer data. But the fact that all prices online are available for everyone to see with a single click also means that price monitoring is much more accessible and affordable.  Initially, one will probably think that this increases the price competition further in the market as every price decrease will be undercut instantly be a price monitoring competitor. However, research suggests this is not the case -- quite the contrary, in fact. To see why, let's think about price monitoring in terms of game theory. In the airline example below, the profit maximizing outcome is where both airlines charge a high price (yielding a total profit of £240m), however, both airlines have an incentive to charge a low price to maximize their own profit, (i.e. getting £140m rather than £120m), and so it follows that the outcome will be the suboptimal low/low that yields a total profit of £200m. ![Screen Shot 2017-05-23 at 10.46.51.png](https://blog.pricebeam.com/hs-fs/hubfs/Blog/Screen%20Shot%202017-05-23%20at%2010.46.51.png?width=493&name=Screen%20Shot%202017-05-23%20at%2010.46.51.png) This hurts both players, which is why there is an incentive to enter collusion agreements and agree on a fixed, high price. Of course, fixing prices is prohibited by antitrust laws, but research found that online retailers enjoy similar benefits from price monitoring: that is, price monitoring increases the likelihood of obtaining a high-high outcome. Typically, when ecommerce firms monitor each other's prices, they will indirectly peg their prices to competitors'. And so, when one decides to raise the price, the others will follow, increasing everyone's pricing power since this is in everyone's interest. A win/win outcome for all parties is obtained, not a lose/lose one as some would intuitively think. 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They use methods such as cost plus a fixed margin. They use guesses and gut feel. They peg their price to a competitor’s. They price themselves too low, leaving money on the table, or too high, forsaking sales volume. They lose out on the profits they should be earning. PriceBeam changes all that. With a methodology that is confirmed to be accurate in thousands of projects, PriceBeam provides AI-powered market insights software that generates actionable insights into consumers' willingness-to-pay, competitive price positioning, packaging and assortment dynamics, promotional benchmarking, and opportunities from new product pricing. 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