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Dynamic pricing of electronic products with consumer reviews

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  • He, Qiao-Chu
  • Chen, Ying-Ju

Abstract

Consumer reviews have become pervasive for e-commerce in recent years, especially for electronic products. In this paper, we investigate the optimal pricing strategies for a platform selling electronic products when consumers sequentially learn about product quality from consumer reviews. We focus on the transient analysis to calibrate how information externalities across the time dimension would distort the seller’s optimal pricing strategies. Facing the “cold start” problem, the seller of high-quality products would choose lower prices to speed up the consumer learning process. Consequently, the optimal prices suffer from downward distortions that increase in product quality in this reputation-riding regime.

Suggested Citation

  • He, Qiao-Chu & Chen, Ying-Ju, 2018. "Dynamic pricing of electronic products with consumer reviews," Omega, Elsevier, vol. 80(C), pages 123-134.
    • Handle: RePEc:eee:jomega:v:80:y:2018:i:c:p:123-134
    DOI: 10.1016/j.omega.2017.08.014
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