Examining the impact of information provision on E-tailers’ pricing strategies

In the platform economy era, information provision plays an important role for e-tailers to improve their competitiveness and affects their consequent pricing decisions. In this study, we formulate the demand function based on the inverted U-shape relationship between information provision quantity and consumer demand through empirical evidence. Using the game-theoretical approach, we optimize the e-tailers’ pricing strategy and find it depends on not only the e-tailer's information provision strategy but also its competitor's and the market information. We find that the e-tailer's optimal price increases with product information when the information provision is low. If e-tailers are homogenous, the e-tailer can use either a revenue- or cost-driven strategy to acquire more profit. In addition, an e-tailer with weaker market power has the last-mover advantage to earn more profit if it adopts the same information provision strategy as the leading e-tailer. A large cost advantage can convert to a profit advantage for the e-tailer if it adopts a moderately differentiated information provision strategy from others. Our findings help e-tailers understand the importance of information provision in affecting their pricing and profits and urge them to have a holistic view of information provision from their competitors. We also provide guidelines for e-tailers to use the comparative strategy, either the same or different, with a certain magnitude, from its competitor's information provision strategy to utilize its market power and cost advantage to earn more profits in the platform economy era.