Paper Info
Title
The effect of online reviews on e-tailers’ pricing in a dual-channel market with competition
Abstract
As opinion-rich information produced by consumers, online reviews function as both informants and recommenders. They are rather influential on the purchasing intention of potential consumers. But how to fix price for maximal profits on basis of online reviews remains a true challenge for online-sellers. Consumers are grouped into three types according to the channel of information they refer for purchasing decisions: (1) online information only; (2) online and offline information; and (3) offline information only. Based on the grouping, we construct a review-involved pricing model by the utility theory and game theory. The model considers the competition in pricing between e-tailer and physical retailer channels, and enables measurement of relationship between pricing and online reviews. Numerical simulation is used to explore the relationship between optimized revenue and other factors such as additional cost of online shopping, number of reviews, and applause rate of reviews. The results show that applause rate always has a positive effect on the pricing and profit in e-tails, and so does the number of online reviews except the case of extremely low applause rate. It is also shown that e-tailers can improve their profit by decreasing additional cost of online shopping, though the price will be lower.
Year
DOI
Venue
2018
10.1007/s13042-015-0346-5
Int. J. Machine Learning & Cybernetics
Keywords
Field
DocType
Online reviews, Pricing, Word-of-mouth, Dual-channel Competition, E-tailer, Game theory
Revenue,Computer science,Microeconomics,Communication channel,Word of mouth,Online and offline,Purchasing,Game theory,Utility theory,Profit (economics)
Journal
Volume
Issue
ISSN
9
1
1868-808X
Citations 
PageRank 
References 
0
0.34
11
Authors
4
Name
Order
Citations
PageRank
kaiqiang guo100.34
hongwei wang2368.68
yuan song361.10
zhanqi du400.34