Strategies for dynamic pricing competition between differentiated sellers: Considering platform fees and strategic consumers

Abstract

AbstractIn the dynamic realm of the platform economy, the intricate relationship between platform charging mechanisms, seller tactics, and consumer behavior is crucial. This study delves into this relationship by constructing a two‐period dynamic game model, examining how different platform charging approaches impact pricing strategies among two distinct sellers, all while considering consumer strategic actions. Our findings reveal that the combination of seller quality differentiation and platform charging methods profoundly shapes consumer strategic actions. Interestingly, strategic consumers do not invariably harm seller profits. In specific settings, such as when using a revenue‐sharing model with slight quality differentiation, high‐quality sellers might even reap greater benefits than when dealing with short‐sighted consumers. Moreover, the decision for sellers to adhere to a specific price isn't always advantageous. For instance, under a revenue‐sharing model with limited competition, a price commitment from a lower quality seller might backfire. Additionally, in scenarios with a fixed‐fee model, there's a noticeable lack of incentive for differentiated sellers to commit to prices. This study accentuates the subtle yet significant influence of consumer strategic actions on seller profits in the platform economy context. It underscores the imperative for both sellers and platforms to remain vigilant and adaptive, ensuring their strategies resonate with the ever‐evolving consumer behaviors.