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

Author

Listed:
  • Jing Zhang

    (Harbin University of Commerce)

  • Na Xu

    (Shandong Technology and Business University)

  • Shizhen Bai

    (Harbin University of Commerce)

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.

Suggested Citation

  • Jing Zhang & Na Xu & Shizhen Bai, 2021. "The optimal pricing decisions for e-tailers with different payment schemes," Electronic Commerce Research, Springer, vol. 21(4), pages 955-982, December.
    • Handle: RePEc:spr:elcore:v:21:y:2021:i:4:d:10.1007_s10660-020-09396-2
    DOI: 10.1007/s10660-020-09396-2
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