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Chinese Journal of Management Science ›› 2019, Vol. 27 ›› Issue (3): 77-84.doi: 10.16381/j.cnki.issn1003-207x.2019.03.008

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Optimal Pricing Strategy Considering the Effect of Experience Delay in Online Shopping

ZHANG Li-gong, GUO Xiao-long, HAN Dong-ya, YU Yu-gang   

  1. School of Management, University of Science and Technology of China, Hefei 230026, China
  • Received:2017-02-15 Revised:2018-04-23 Online:2019-03-20 Published:2019-04-28

Abstract: The development of electronic commerce technology makes shopping more convenient; while at the same time, the uncertainty of consumers' preference for products occurs as a result of that the product experience-information cannot be realized immediately. In reality, consumers will further strategically purchase two or more products and then return some of them when the experience-information is realized. In this paper, two products (A and B) which have horizontal differences are sold by a firm, such as the colors or styles which do not influence the quality of the products. The consumers may buy more than one product which have horizontal differences, retain one and return the others after fitting, which is considered as strategic purchasing behavior. A Hotelling model is developed to describe the horizontal difference between the two products. Product A is assumed to be located at the point 0 and product B is located at the point 1. Consumers are uniformly distributed on the support[0,1]. Purchasing utilities of three choices (purchasing product A, purchasing product B, purchasing both of them and return one after fitting) for consumers are derived, based on the expected demands and profit for the firm can be realized. Some managerial implications are obtained from the analysis of the model. First, this result shows that only when the negative effect caused by the comparison or return is small enough, the strategic return behavior occurs. Second, the price of the products decreases with the negative impact caused by the comparison or return of the consumer, while decreasing with the product's inherent differentiation awareness. Third, the price of products increases with the preference when one of the products has no solely demand and the price of product increases with the preference of the consumers under certain condition when there are consumers purchasing all products separately. Our study contributes to the theoretical basis for strategic consumers, especially in the cases where consumers have preference uncertainty.

Key words: preference uncertainty, strategic consumers, experience delay, online retailing, product return, pricing

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