Negative price premium effect in online market-The impact of competition and buyer informativeness on the pricing strategies of sellers with different reputation levels

Authors:
Yuewen Liu;Juan Feng;Kwok Kee Wei
Affiliations:
School of Management, Xi'an Jiaotong University, 28, Xian Ning West Road, Xi'an, China;Department of Information Systems, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon Tong, Hong Kong;Faculty of Business, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon Tong, Hong Kong
Venue:
Decision Support Systems
Year:
2012

Citing 17
Cited 0

Reducing buyer search costs: implications for electronic marketplaces

Management Science - Special issue: Frontier research on information systems and economics
Frictionless Commerce? A Comparison of Internet and Conventional Retailers

Management Science
Doing their bidding: An empirical examination of factors that affect a buyer's utility in Internet auctions

Information Technology and Management
Understanding the confluence of retailer characteristics, market characteristics and online pricing strategies

Decision Support Systems
The roles of players and reputation: evidence from eBay online auctions

Decision Support Systems
Price competition in e-tailing under service and recognition differentiation

Electronic Commerce Research and Applications
A trust-based consumer decision-making model in electronic commerce: The role of trust, perceived risk, and their antecedents

Decision Support Systems
Reducing internet auction fraud

Communications of the ACM - Web searching in a multilingual world
Consumer informedness and diverse consumer purchasing behaviors: Traditional mass-market, trading down, and trading out into the long tail

Electronic Commerce Research and Applications
Oligopolistic price competition and adverse price effect in online retailing markets

Decision Support Systems
On-line Reputation Systems: The Effects of Feedback Comments and Reactions on Building and Rebuilding Trust in On-line Auctions

International Journal of Electronic Commerce
Revisiting feedback systems: Trust building in digital markets

Information and Management
Evidence of the effect of trust building technology in electronic markets: price premiums and buyer behavior

MIS Quarterly
Electronic marketplaces and price transparency: strategy, information technology, and success

MIS Quarterly
Dressing your online auction business for success: an experiment comparing two ebay businesses

MIS Quarterly
Internet exchanges for used goods: an empirical analysis of trade patterns and adverse selection1

MIS Quarterly
Research Note---Online Price Dispersion: A Game-Theoretic Perspective and Empirical Evidence

Information Systems Research

Quantified Score

Hi-index	0.00

Visualization

Abstract

Motivated by the contradictory findings in literature regarding whether high-reputation sellers enjoy a price premium over low-reputation sellers, this paper examines the pricing strategies of sellers with different reputation levels. We find that a negative price premium effect (i.e., a high-reputation seller charges a lower price than a low-reputation seller) exists due to: (1) the presence of both informed and uninformed buyers, which makes sellers follow mixed pricing strategies. It is then possible for a high-reputation seller setting a lower price than a low-reputation seller. Moreover, when the proportion of informed buyers exceeds a certain threshold, the expected price of a high-reputation seller is even lower than that of a low-reputation seller; (2) the competition among the sellers, which reduces the high-reputation sellers' prices but increases the low-reputation sellers' prices. Consequently, a high-reputation seller is more likely to charge a lower price than a low-reputation seller when the competition intensifies. Our empirical findings also support our theoretical results on the negative price premium effect.