Service investment for online retailers with social media—Does it pay off?

Ruiqi Hou, René de Koster and Yugang Yu

Transportation Research Part E: Logistics and Transportation Review, 2018, vol. 118, issue C, 606-628

Abstract: We investigate the impact of investments in delivery service with one or two major competing online retailers. Customers diffuse among the retailers, based on purchasing experience and online reviews (i.e., social network). Firms decide on investments aimed at maximizing profit. For both Nash and Stackelberg competition cases, the effect on market share, optimal investment cost and profit are calculated. Cases without social network are also studied, showing that a social network leads to faster convergence of the market. When a social network exists, both the leader and follower invest more, with higher profits. Our results confirm experiences from competition practice.

Keywords: Delivery service investment; Online retailers; Nash equilibrium; Stackelberg game; Social media; Service competition (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1366554518302928
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:118:y:2018:i:c:p:606-628

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.2018.08.011

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 ().