Geo-Fencing or Geo-Conquesting? a strategic analysis of Location-Based coupon under different market structures

Long Ding, Peng Liu and Sen Hu

Transportation Research Part E: Logistics and Transportation Review, 2023, vol. 174, issue C

Abstract: Location-based technology enables firms to target consumers with personalized coupons based on their real-time locations, making location-based coupons (LBC) an innovative marketing tool. In this paper, we consider two types of LBC strategies, namely defensive geo-fencing versus offensive geo-conquesting. With a defensive LBC strategy, a company sets a virtual geo-fence by offering coupons with deeper discounts to consumers located closer to the focal firm. Using a spatial model, we examine how two competing companies choose between defensive and offensive LBC strategies, as well as the impact of LBC strategies on company profits, consumer surplus, and social welfare. The results show that the defensive LBC strategy lowers revenue in a monopoly market but increases it under duopoly conditions. In a duopoly market, both firms adopting the defensive LBC strategy is the Nash equilibrium outcome, leading to the highest profits but lowest consumer surplus. The misalignment of interests among firms and consumers requires policymakers to regulate firms’ LBC strategies for the sake of customers.

Keywords: Market structure; Mobile marketing; Location-based coupon; Personalized pricing; Game theory (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1366554523001047
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:transe:v:174:y:2023:i:c:s1366554523001047

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/bibliographic
http://www.elsevier. ... 600244/bibliographic

DOI: 10.1016/j.tre.2023.103116

Access Statistics for this article

Transportation Research Part E: Logistics and Transportation Review is currently edited by W. Talley

More articles in Transportation Research Part E: Logistics and Transportation Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().