Optimal pricing strategy with disappointment‐aversion and elation‐seeking consumers: compared to price commitment

Online product pricing is an important factor that affects the purchase of customers and the earnings of e‐commerce platform enterprises. It has an increasingly prominent influence on consumers’ purchasing decisions. To study the influence of customers’ anchoring psychology and product pricing on customers’ purchasing behaviors, this paper proposes a pricing model that considers online consumers to be anchored by the product price and sales. The cognitive bias of online consumers is described by a utility function based on an anchoring‐adjustment heuristic, and consumer choice behavior and an online product pricing strategy are studied with a multinomial logit model. Then, it studies the influence of the anchoring point and anchoring degree on optimal pricing, sales and profit. In particular, when consumers are anchored only by sales of goods, the optimal solution is monotonic with respect to the anchoring degree. However, when consumers are anchored by both price and sales, both factors affect consumer behaviors and produce more complex results. This paper provides a flexible pricing mechanism for platform enterprises, and it can provide a theoretical basis and decision support for dynamic pricing of platform enterprises based on historical consumption data.

Section: Literature Reviewmentioning

confidence: 99%

Optimal pricing of online products based on customer anchoring‐adjustment psychology

Liu

Zhou

et al. 2022

“…Lastly, our model considers perfectly rational e‐tailers and consumers. Bounded rationality may lead to interesting insights (H. Wang et al., ; N. Wang et al., ; Zhao et al., ).…”

Section: Resultsmentioning

confidence: 99%

For showing only, or for selling? The optimal physical store mode selection decision for e‐tailers under competition

Fan

Wang

Zhang

2019

More and more e-tailers are launching physical stores, in addition to their online presence. Whether and when it is best for the physical channel to be a pure showroom or a selling store remains unanswered. To address this issue, we develop a game-theoretical model wherein two competitive e-tailers decide to launch physical stores for showing only (as a showroom) or for actual transactions (as a selling store). By deriving the equilibrium, we obtain three major findings. First, building a pure showroom or a pure selling store is not always optimal. Interestingly, when the proportion of the store consumer segment is not too high, and the strength of the consumers' brand preference is intermediate, an asymmetric channel configuration occurs in equilibrium, that is, one e-tailer launches a showroom and the other launches the selling store. Second, if the strength of the consumers' brand preference is high relative to the proportion of the store consumer segment, a "prisoner's dilemma" emerges, that is, both e-tailers are worse off in the pure showroom channel configuration. Third, the total consumer surplus reaches the highest level if a symmetric showroom or an asymmetric channel equilibrium occurs. Otherwise, the equilibrium channel configurations are always suboptimal for consumers.

“…Future research can be extended to the optimal decision of upstream suppliers such as brand owners and manufacturers. Third, while we only consider consumers’ anticipated regrets, the uncertainty triggered by the penetration of counterfeits may also lead to other irrational behavior of consumers, such as disappointment aversion (Liu and Shum, 2013; Wang et al., 2021a). Therefore, it is interesting to analyze the impact of consumers’ disappointment aversion as well.…”

Section: Discussionmentioning

confidence: 99%

Optimal pricing strategies of e‐commerce supply chain considering consumers’ anticipated regrets under the background of blockchain anti‐counterfeiting technology

Yu,

Guan,

et al. 2023

In this study, we investigate pricing decisions with different decision sequences in an e‐commerce supply chain. The e‐commerce platform sells blockchain‐compatible products through a self‐operated model, while the retailer operating on the platform sells general products. Furthermore, we take into account the impact of counterfeits infiltrating the general product market. This can trigger consumers’ anticipated regrets, including high‐price regret and fake purchase regret. We design three scenarios: Scenario ES (the e‐commerce platform makes the decision first), Scenario RS (the retailer makes the decision first), and Scenario VN (they make decisions simultaneously). We study the impact of consumers’ anticipated regrets and the decision sequence on pricing strategies, as well as the profits of the e‐commerce platform and the retailer. Our results show that the optimal retail prices of the two versions of the products and the profits of the e‐commerce platform and the retailer are negatively correlated with the relative regret intensity. The profits of the e‐commerce platform and the retailer are the lowest under Scenario VN due to the fiercest competition. The e‐commerce platform prefers Scenario RS to Scenario ES. If the counterfeit penetration rate is small and the commission rate is large, the retailer prefers Scenario RS to Scenario ES. However, if the counterfeit penetration rate is high, or if both the counterfeit penetration rate and the commission rate are low, the retailer prefers Scenario ES to Scenario RS. Furthermore, if government penalties (or consumer claims) exist, the retailer should combat counterfeiting appropriately for better financial performance.