Effects of online reviews and competition on quality and pricing strategies

Zhao, Cui; Wang, Xiaojun; Xiao, Yongbo; Sheng, Jie

doi:10.1111/poms.13791

Cited by 28 publications

(9 citation statements)

References 50 publications

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“…The horizontal differentiation between these two firms is maximized in the standard Hotelling linear city model, that is, firm

i

is located at 0 and firm

j

located at 1. The marginal production cost of both products is constant and normalized to zero, similar assumptions are widely adopted in the relevant literature, for example, Ebina et al (2015), Zhao et al (2022), and Ebina et al (2022). Denoting the greenness level of the green manufacturer's product is

g_{j}

, the green manufacturer incurs an additional R&D cost, which is increasing and convex with respect to the greenness level and is denoted as

\frac{1}{2} {kg}_{j}^{2}

.…”

Section: Modelmentioning

confidence: 99%

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Li,

Tan

2024

Manage Decis Econ

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Leveraging real options theory, we have constructed a utility‐based model to examine the influence of uncertainty, risk aversion, and competition on the optimal entry timing for green manufacturers and traditional manufacturers, as well as the degree of greenness for follower products. Our analysis reveals that increased uncertainty and risk aversion enhance the value of investment opportunities for manufacturers, thereby raising their investment thresholds. Even though competition reduces the value of market entry for the leader compared to monopoly, its investment thresholds are unaffected by competition. More interestingly, consumer green preferences exhibit a non‐monotonic impact on green enterprise's entry timing.

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“…The horizontal differentiation between these two firms is maximized in the standard Hotelling linear city model, that is, firm

i

is located at 0 and firm

j

g_{j}

, the green manufacturer incurs an additional R&D cost, which is increasing and convex with respect to the greenness level and is denoted as

\frac{1}{2} {kg}_{j}^{2}

.…”

Section: Modelmentioning

confidence: 99%

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Li,

Tan

2024

Manage Decis Econ

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“…Zhao & Li, 2018;H. Guan et al, 2023;Lu et al, 2023;C. Zhao et al, 2022) on manufacturers' encroachment decisions.…”

Section: Manufacturer Encroachmentmentioning

confidence: 99%

“…(2023) investigated the information-sharing strategies of overconfident retailers when faced with manufacturer encroachment; C. Zhao et al (2022) explored the impact of information acquisition on manufacturers' encroachment strategies and retailers' information-sharing practices, highlighting that manufacturers can independently gather market information. Additionally, some studies focused on scenarios where manufacturers hold information advantages.…”

Section: Manufacturer Encroachmentmentioning

confidence: 99%

Manufacturer Encroachment with Consumer Digital Privacy

Li,

Lu,

Yan

et al. 2024

Preprint

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The rapid advancement of digital tools exacerbates privacy issues in the digital channel, despite providing enhanced media richness. This study distinguishes between consumers who prioritize privacy protection and those who prefer privacy disclosure, examining the impact of digital privacy on manufacturers’ channel strategy choices. Utilizing a game-theoretic model, we analyze manufacturers' decisions regarding the encroachment and retention of existing indirect channels. We explore three key strategies: no encroachment, encroachment, and shifting. Our findings indicate that when consumers favor privacy disclosure, manufacturers consistently opt for encroachment using the shifting strategy. Conversely, when consumers prioritize privacy protection, the optimal strategy for manufacturers varies according to the intensity of these preferences. Specifically, manufacturers tend to choose the encroachment strategy for weak preferences and the no-encroachment strategy for strong preferences. The potential for a win-win outcome between manufacturers and retailers is contingent upon the cost-efficiency of the manufacturer's channel construction. Furthermore, in scenarios where the manufacturer chooses to encroach, consumers consistently benefit. This study highlights the critical importance of assessing the type and degree of consumers' privacy preferences when establishing a direct-to-consumer digital channel. By understanding these nuances, firms can make informed decisions that maximize benefits for both themselves and consumers.

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“…Zhao and Zhang (2019) study the optimal quality and pricing decisions for a customer-intensive service system by a dynamic model incorporating a queuing system, taking into consideration of online customer reviews. Zhao et al (2022) investigate the effects of online reviews on product quality and pricing decisions in a duopoly market that consists of two competing firms. Unlike the aforementioned studies, we consider firm competition and dynamic adjustment of the product policies in investigating the impacts of online customer reviews on product pricing and quality decisions and determine the optimal strategy selection.…”

Section: Product Quality and Pricing In The Presence Of Online Custom...mentioning

confidence: 99%

The influence of online customer reviews on two-stage product strategy in a competitive market

Zhao

Peng

2023

Ann Oper Res

Self Cite

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We investigate quality and pricing decisions for two competing firms in an e-marketplace with online customer reviews. Through developing two-stage game-theoretical models and comparing the equilibriums, we examine the optimal choice among different alternative product strategies: static strategy, adjusting the price, adjusting the quality level, and adjusting both the quality and price dynamically. Our results show that the existence of online customer reviews tends to encourage firms to increase quality and charge low prices in the early stage, and decrease quality and raise prices in the later stage. Moreover, firms should choose the optimal product strategies depending on the impact of customers' private assessment of product quality from the product information disclosed by firms on the overall perceived product utility and customer uncertainty about the perceived degree of product fit. After our comparisons, the dual-element dynamic strategy is more likely to outperform other strategies financially. Furthermore, we extend our models to examine how the optimal choice of quality and pricing strategies will change if the competing firms have asymmetric initial online customer reviews. From the extended analysis, a dynamic pricing strategy may generate better financial performance than the dynamic quality strategy, which is different from the finding in the basic scenario. Firms should choose the dual-element dynamic strategy, the dynamic quality strategy, the dual-element dynamic strategy coupled with dynamic pricing, and the dynamic pricing strategy in sequence as the impact of customers' private assessment of product quality on the overall perceived product utility and the weight that the second-stage customers place on their private assessment increase.

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Effects of online reviews and competition on quality and pricing strategies

Cited by 28 publications

References 50 publications

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Manufacturer Encroachment with Consumer Digital Privacy

The influence of online customer reviews on two-stage product strategy in a competitive market

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