Dynamic Pricing in B2C Based on Online Product Reviews

Hongwei Wang · Wei Zhang · Lijuan Zheng

12 citations0/0 files storedProcedia Engineering

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Supply Chain and Inventory Management Digital Marketing and Social Media Consumer Market Behavior and Pricing

Abstract

To study how e-tailors should fix the price to influence word-of-mouth to maximize profits, this paper comes up with a dynamic pricing model based on online product reviews. Customers base consumption decisions on the principle of utility maximization. A lower price can lead to more positive reviews and improve the utility, but it may reduce the profit. The model gives the optimal pricing strategy for the e-tailor in a duopoly market competing with an offline retailor. The analytical results show with the increase of online reviews, the optimal pricing of the e-tailor increases and the growth rate declines.

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References

1988Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence 2003Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions 1999Combined Pricing and Inventory Control Under Uncertainty 2005Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty 2010Price Effects in Online Product Reviews: An Analytical Model and Empirical Analysis1 2004EXPLORING THE VALUE OF ONLINE REVIEWS TO ORGANIZATIONS: IMPLICATIONS FOR REVENUE FORECASTING AND PLANNING 2002Internet pricing with a game theoretical approach: concepts and examples 2010Optimal software pricing in the presence of piracy and word-of-mouth effect

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2013An order allocation model in a two-echelon logistics service supply chain based on the rational expectations equilibrium 2020Pricing Strategies in Presence of Online Consumer Ratings - from the Product Customization Perspective

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