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E-retailing of restaurant services: pricing strategies in a competing online environment

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Listed:
  • Xiabing Zheng

    (University of Science and Technology of China)

  • Xiaolong Guo

    (University of Science and Technology of China)

Abstract

Establishing online channels and providing online discounts by building business partner relationships with third-party websites have emerged as important and effective marketing strategies in the restaurant industry. This study examines the optimal pricing strategy of restaurants in a competing environment when they participate in this relationship with a third-party website. Results suggest that neither participation nor online price discount should be encouraged for all restaurants. In particular, for a restaurant with a fixed service capacity, participation and online price discount are recommended when the number of offline loyal customers is relatively small. With the increase in the number of loyal offline customers, the optimal online discount rate decreases, whereas the unit commission fee for the third-party website remains constant. When the optimal discount rate reaches zero, the optimal decision for the restaurant is to decrease the unit commission fee. Based on these findings, this study analytically provides the optimal pricing strategies for restaurants and the corresponding boundaries for the strategy set.

Suggested Citation

  • Xiabing Zheng & Xiaolong Guo, 2016. "E-retailing of restaurant services: pricing strategies in a competing online environment," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(11), pages 1408-1418, November.
    • Handle: RePEc:pal:jorsoc:v:67:y:2016:i:11:d:10.1057_jors.2016.29
    DOI: 10.1057/jors.2016.29
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    References listed on IDEAS

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    Cited by:

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    2. Hui Zhang & Kai Luo & Guanqun Ni, 0. "The effects of price subsidy and fairness concern on pricing and benefits of take-away supply chain," Journal of Combinatorial Optimization, Springer, vol. 0, pages 1-19.
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    5. Jingmei Xu & Li Hu & Xiaolong Guo & Xia Yan, 2020. "Online cooperation mechanism: game analysis between a restaurant and a third-party website," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(1), pages 61-73, February.

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