One of the strengths of online retailing is the ability to easily and quickly adjust the prices offered to shoppers — based on supply-demand considerations and how well products are selling at various prices. But this strength can also be a liability if prices are changed too frequently. This may confuse shoppers, cause some shoppers to delay purchases and wait for better prices, and annoy customers who buy early in the day and then see a lower price that same day.

Consider this recent example, reported by Stephanie Clifford for the New York Times: “The day before Thanksgiving, Amazon was offering a discounted price of $49.96 on a popular Xbox game, the same price as Wal-Mart and 3 cents lower than Target. Amazon dropped its price on the game, Dance Central 3, to $24.99 on Thanksgiving Day, matching Best Buy’s ‘doorbuster’ special, and went to $15 once Wal-Mart offered the game at that lower price. Amazon then brought the price up, down, down again, up and up again — in all, seven price changes in seven days. The unluckiest buyer paid more than triple the price that the luckiest buyer paid.”

As Clifford adds: “Retail price wars online have entered a new era of speed and precision, creating a confusing landscape for shoppers in which prices leap and plummet on short notice. In the old days, merchants sent employees into competitors’ stores to check on pricing, and days later ‘sale’ signs reflected new markdowns. Now, sophisticated computer programs accomplish the same goal online within hours, and even minutes.”

Click the logo for Clifford’s full story.