Posted in Marketing and Strategy Terms, Total Reads: 635
Definition: Price Transparency
It means that all the parties involved in the transaction are aware of the cost price and selling price of the product. This makes the buyer more aware of the costs involved and the rationale behind pricing the product. They can compare the prices of all the sellers and they can take an informed decision before making the purchase.
High degree of price transparency discourages the involvement of intermediaries and hence these intermediaries are not able to take advantage of buyer’s lack of information. One of the prerequisites of a free market is price transparency.
With the increasing penetration of internet in India people have all the information available everytime. Many websites like Junglee.com, Bestbuy.com offer price comparison across the various e-commerce sites like Flipkart, Snapdeal, Amazon and so on.
But there are some disadvantages to the buyers also with price transparency. Since the buyers know about the costs involved in the product, the retailers don’t offer bulk discount which they would otherwise give had the transparency not been there. Producers also will not bother much about the increase in price of raw materials as they can pass that on to the customers. They would not make much effort to achieve economies of scale. This will make production less efficient.