The optimal pricing decisions for e-tailers with different payment schemes

Jing Zhang (), Na Xu () and Shizhen Bai ()
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Jing Zhang: Harbin University of Commerce
Na Xu: Shandong Technology and Business University
Shizhen Bai: Harbin University of Commerce

Electronic Commerce Research, 2021, vol. 21, issue 4, No 3, 955-982

Abstract: Abstract Along with the quick development of e-commerce, different payment schemes are provided to online consumers to improve their shopping experience. Currently, the payment schemes can be divided into two categories, one is pay-to-order, and the other is pay-on-delivery. Payment scheme directly affects consumers’ behavior and e-tailer’s pricing decision in e-commerce. In this paper, we characterize the consumers’ purchase and returns behavior with consumer utility function, build the e-tailer’s profit functions and solve them to obtain the optimal pricing decisions, both in the condition of pay-to-order and dual scheme (including both pay-to-order and pay-on-delivery). We find that managers can affect consumers’ decision on choosing payment scheme by adjusting the e-tail price. We demonstrate the transfer of payment scheme, along with the transaction cost and return cost. Sensitivity analysis is provided to tell e-commerce managers that they should consider the influence of the e-purchase cost, together with the characteristic of both consumers and products when designing the payment scheme.

Keywords: Pay-to-order; Pay-on-delivery; E-tail price; Consumer behavior; Payment scheme (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10660-020-09396-2

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