RETRACTED ARTICLE: The optimal pricing strategy to evaluate the reputations of sellers in online platforms using the game theory model

Zehao Chen (), Yanchen Zhu, Tianyang Shen and Yufan Ye
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Zehao Chen: Xi-an Jiaotong Liverpool University
Yanchen Zhu: The University of Edinburgh
Tianyang Shen: University of Oxford
Yufan Ye: Zhejiang University

Operations Management Research, 2022, vol. 15, issue 3, No 22, 953-964

Abstract: Abstract Most online markets establish reputation systems to assist in building trust between sellers and buyers. Sellers’ reputations not only provide guidelines for buyers but may also inform sellers of their optimal pricing strategy. In this research, we assumed two types of buyers – informed buyers and uninformed buyers. Informed buyers know more about the reputation of the seller but may incur a search cost. Then we developed a benchmark model and a competition model. We found that high reputation sellers and low reputation sellers adopt different pricing strategies depending on the informativeness of buyers and the competition among sellers. With a large proportion of well-informed buyers, high reputation sellers may charge a lower price than low reputation sellers, i.e., a negative price premium effect, in contrast to conclusions of some previous studies. Empirical findings were consistent with our theoretical models. We collected data on five categories of products, televisions, laptops, cosmetics, shoes, and beverages, from Taobao – a leading e-commerce market. A negative price premium effect was observed for TVs, laptops, and cosmetics; a price premium effect was observed for beverages; no significant trend was observed for shoes. We infer product value and market complexity are the main factors of buyer informativeness.

Keywords: Pricing strategy; Optimization; Reputation system; e-commerce market; Game theory; Reputation inflation (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s12063-022-00306-3

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