Abstract:

Based on consumer perceived value, this paper connects the prevalence of online word-of-mouth and the sellers’ price-adjusting behavior in e-commerce. We build a two-stage pricing model for an oligarch seller, based on the influence of online word-of-mouth dissemination. The informed customers possess more product information and the less-informed customers own less product information. The information disseminated through online word-of-mouth can change customer perceived value. The informed customers pursue to maximize total utility acquired from both purchasing product and disseminate online word-of-mouth. The oligarch seller adopts reasonable pricing strategies to maximize total profit of two stages. We find that if the informed customers have more positive information, (1)With information gap decreasing gradually, (a)when information dissemination is relatively inefficient, the seller’s optimal pricing strategy usually experiences the following three processes sequentially: giving up incentive pricing strategy and no information disseminated by the informed customers, implementing incentive pricing strategy and some information shared by the informed customers, and ceasing to incentive strategy but the largest amount of information shared by the informed customers. (b)When information dissemination is relatively efficient, the seller’s optimal pricing strategy just experiences the last two processes of above three processes sequentially. (2)Under the existence of the difference of information value for the two segment customers, only when the inefficiency of information dissemination is smaller, relative to high information value, this difference can affect the optimal decisions of the seller and the informed customers. And from the qualitative point of view, with information value for the receivers (the less-informed customers) increasing continually, the range of information gap resulting in that the seller’s optimal strategy is to exert incentive pricing will increase first and then decrease. These findings provide some usefully managerial insights for online sellers’ pricing strategy.

Key words: Online word-of-mouth, Customer perceived value, Incentive pricing, Information gap