TY - GEN
T1 - Using online competitor's inventory information for pricing
AU - Dewan, Rajiv
AU - Freimer, Marshall
AU - Jiang, Yabing
PY - 2007
Y1 - 2007
N2 - Information displayed on an e-commerce site can be used not just by the intended customers but also by competitors. In the paper, we examine the effect of such proactive information use in the setting of e-commerce retailing where duopoly e-tailers set their prices of a commodity that is in short supply. While e-tailers enhance their service quality by making stockout information available online, that inventory information could also be used by competitors to determine their prices. Each e-tailer can launch software agents to detect its competitor's inventory position and make its price decision contingent on that position. We show that when customer reservation value is relatively high, and e-tailers do not resemble each other in terms of fill rate, both e-tailers choose to adopt the software agent technology and price dynamically at equilibrium. The high availability e-tailer can charge higher prices and enjoy a higher profit level than the low availability e-tailer. More customers prefer to visit the high fill rate e-tailer first under the dynamic pricing scheme than under the static pricing scheme. Because total search costs are reduced, social welfare is improved under the new dynamic pricing scheme.
AB - Information displayed on an e-commerce site can be used not just by the intended customers but also by competitors. In the paper, we examine the effect of such proactive information use in the setting of e-commerce retailing where duopoly e-tailers set their prices of a commodity that is in short supply. While e-tailers enhance their service quality by making stockout information available online, that inventory information could also be used by competitors to determine their prices. Each e-tailer can launch software agents to detect its competitor's inventory position and make its price decision contingent on that position. We show that when customer reservation value is relatively high, and e-tailers do not resemble each other in terms of fill rate, both e-tailers choose to adopt the software agent technology and price dynamically at equilibrium. The high availability e-tailer can charge higher prices and enjoy a higher profit level than the low availability e-tailer. More customers prefer to visit the high fill rate e-tailer first under the dynamic pricing scheme than under the static pricing scheme. Because total search costs are reduced, social welfare is improved under the new dynamic pricing scheme.
UR - http://www.scopus.com/inward/record.url?scp=39749165914&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=39749165914&partnerID=8YFLogxK
U2 - 10.1109/HICSS.2007.595
DO - 10.1109/HICSS.2007.595
M3 - Conference contribution
AN - SCOPUS:39749165914
SN - 0769527558
SN - 9780769527550
T3 - Proceedings of the Annual Hawaii International Conference on System Sciences
BT - Proceedings of the 40th Annual Hawaii International Conference on System Sciences 2007, HICSS'07
T2 - 40th Annual Hawaii International Conference on System Sciences 2007, HICSS'07
Y2 - 3 January 2007 through 6 January 2007
ER -