The impact of recommender systems and pricing strategies on brand competition and consumer search

CHi ZHOU, Mingming LENG, Zhibing LIU*, Xin CUI, Jing YU

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

As a type of internet and business intelligence technology, recommender systems have been widely adopted by store brands to improve brand competition and to affect consumers’ search behaviors in the e-commerce market. This paper studies the effects of recommender systems and pricing strategies on the competition between store brands and national brands and on consumers’ search behaviors. We develop game models without and with recommender systems and analyze the equilibrium solutions under uniform pricing and differential pricing strategies. The results show that the brand-preference consumers’ market share will affect the strategy choice of recommendation system and differential pricing for the store brand. When the store brand is recommended, the store brand should adopt the differential pricing strategy and the price of the store brand will exceed that of the national brand. Furthermore, we also find that when the brand-preference consumers’ market share is low and the reservation price difference is high, the store brand can gain the competitive advantage by improving recommendation strength. In addition, a recommender system attracts consumers by converting their search costs into the recommendation costs of the system.
Original languageEnglish
Article number101144
Number of pages15
JournalElectronic Commerce Research and Applications
Volume53
Early online date26 Mar 2022
DOIs
Publication statusPublished - May 2022

Bibliographical note

Funding Information:
This work is supported by the National Natural Science Foundation of China (Nos. 71702129 and 72071092) and the China Postdoctoral Science Foundation (No. 2017M610160).

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

  • Brand competition
  • Consumer search
  • Recommender system
  • Uniform pricing
  • Differential pricing

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