Effects of online reviews and competition on quality and pricing strategies

• 成果类型: Review
• 署名作者: Zhao, Cui; Wang, Xiaojun; Xiao, Yongbo; Sheng, Jie
• 署名单位: Tsinghua University; University of Bristol; Tsinghua University; University of London; Queen Mary University London
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13791
• 发表日期: 2022
• 页码: 3840-3858
• 关键词: Nash game; online reviews; optimal pricing; quality improvement

摘要

By providing useful product information from the perspective of other buyers, online product/service reviews can help customers better evaluate the true quality of products and judge whether a product is a good fit for them. Based on online reviews, firms may improve product quality and/or adjust selling price to compete with other firms. In this study, we investigate the effects of online reviews on product quality and pricing decisions in a duopoly market that consists of two competing firms. Specifically, we consider a stylized two-period model and study the equilibrium decisions based on a Nash game framework. In the base scenario, the selling prices are exogenously given, and the firms decide on the product quality across two periods to optimize their respective profits. We study the equilibrium decisions in the static setting (in which the product quality remains the same across the two periods) and in the dynamic setting (in which the product quality can be improved in the second period), respectively. In the extended scenario, the selling prices can be endogenously determined as well. For each scenario, we compare the equilibrium decisions under dynamic competition with those under static competition through theoretical analysis and numerical experiments, which uncover some interesting managerial insights regarding the impact of online reviews under competition.