The impact of online recommendation on duopoly brands competition with heterogeneous searchers

Xin CUI, Chi ZHOU*, Mingsen CHU, Jing YU

*Corresponding author for this work

Research output: Book Chapters | Papers in Conference ProceedingsConference paper (refereed)Researchpeer-review

Abstract

The emergence of online recommendation systems has changed the channel status of traditional brands, enabling the Internet brand to enter the market and be profitable. This paper proposes a game problem of duopoly brands competition, in which searchers determine optimal search efforts and then brands decide optimal selling prices. The results show that with increasing the online recommendation strength, selling prices of the brands change in opposite direction, and efforts of the consumers search decrease. Moreover, the influence of online recommendation on profit of Internet brand is greater than that of traditional brand. When the feeble online recommendation strength is detrimental to the profit of the burgeoning Internet brand, thus the Internet brand should enhance the technical strength to reduce the online recommendation cost. However, as the online recommendation strength increases, the Internet brand's profit increases, and more profitable than the traditional brand. In addition, the results demonstrate that the Internet brand utilizes online recommender system to cannibalize traditional channel. Therefore, to combat the cannibalization effect, the traditional brand should also introduce online recommendation service to recover the loss from the smaller market share.

Original languageEnglish
Title of host publicationProceedings of the 8th International Conference on Logistics and Systems Engineering 2018
EditorsWei LI, Hanjiang ZHANG, Yan PANG, Henry ZHANG
PublisherAussino Academic Publishing House (AAPH)
Pages558-566
Number of pages9
ISBN (Electronic)9781921712685
ISBN (Print)9781510890121
Publication statusPublished - 2019
Externally publishedYes
Event8th International Conference on Logistics and Systems Engineering 2018 - Changsha City, China
Duration: 6 Dec 20189 Dec 2018

Conference

Conference8th International Conference on Logistics and Systems Engineering 2018
Country/TerritoryChina
CityChangsha City
Period6/12/189/12/18

Bibliographical note

Publisher Copyright:
© 2019 Proceedings of the 8th International Conference on Logistics and Systems Engineering 2018. All rights reserved.

Keywords

  • Brands competition
  • Consumer search
  • Game theory
  • Online recommendation

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