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Online store discount strategy in the presence of consumer loss aversion

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  • Ma, Shanshan
  • Lin, Jie
  • Zhao, Xuan

Abstract

Consider a manufacturer׳s two marketing strategies: sell one product in a physical shop, or differentiate the product in some non-essential attribute and sell them in the physical shop and online store respectively. The consumers can be divided into two groups depending on whether or not they are loss averse. This paper explores whether the manufacturer should engage in online selling. If so, how does the manufacturer set an appropriate discount price and how many products should the manufacturer make available for each channel? We obtain the optimal discount strategy and product quantity under the conditions of different online profit margin and different expected consumer valuation. Finally, we analyze the influence of expected consumer valuation, valuation variability, and the degree of loss aversion to the optimal discount price and optimal expected profit.

Suggested Citation

  • Ma, Shanshan & Lin, Jie & Zhao, Xuan, 2016. "Online store discount strategy in the presence of consumer loss aversion," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 1-7.
    • Handle: RePEc:eee:proeco:v:171:y:2016:i:p1:p:1-7
    DOI: 10.1016/j.ijpe.2015.10.016
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    References listed on IDEAS

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    Cited by:

    1. Yawen Zhang & Bo Li & Xue Chen & Shuang Wu, 2020. "Online advance selling or not: Pricing strategy of new product entry in a supply chain," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1446-1461, December.
    2. Chen, Yenming J. & Sheu, Jiuh-Biing, 2017. "Non-differentiated green product positioning: Roles of uncertainty and rationality," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 103(C), pages 248-260.
    3. Shen, Bin & Qian, Rongrong & Choi, Tsan-Ming, 2017. "Selling luxury fashion online with social influences considerations: Demand changes and supply chain coordination," International Journal of Production Economics, Elsevier, vol. 185(C), pages 89-99.
    4. Xu, Xun & Munson, Charles L. & Zeng, Shuo, 2017. "The impact of e-service offerings on the demand of online customers," International Journal of Production Economics, Elsevier, vol. 184(C), pages 231-244.
    5. Huang, Hu & Ke, Hua & Wang, Lei, 2016. "Equilibrium analysis of pricing competition and cooperation in supply chain with one common manufacturer and duopoly retailers," International Journal of Production Economics, Elsevier, vol. 178(C), pages 12-21.
    6. Jiang, Yuqing & Liu, Fan & Lim, Andrew, 2021. "Digital coupon promotion and platform selection in the presence of delivery effort," Journal of Retailing and Consumer Services, Elsevier, vol. 62(C).
    7. Wang, Xuerong & Leng, Mingming & Song, Jingpu & Luo, Chunlin & Hui, Sunyuen, 2019. "Managing a supply chain under the impact of customer reviews: A two-period game analysis," European Journal of Operational Research, Elsevier, vol. 277(2), pages 454-468.
    8. Song, Yanan & Zhao, Xiaobo, 2016. "Strategic customer behavior facing possible stockout: An experimental study," International Journal of Production Economics, Elsevier, vol. 180(C), pages 57-67.
    9. Xu, Jian & Duan, Yongrui, 2020. "Pricing, ordering, and quick response for online sellers in the presence of consumer disappointment aversion," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 137(C).

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