Abstract
We develop a duopoly model to examine how online reviews influence the decisions of two competing online sellers who sell products of differentiated quality under different returns policies. We derive the competing sellers' optimal decisions on price and returns policy with and without online reviews, and we find that online reviews have greater impact on the high-quality seller than on the low-quality seller. If the salvage value of the product is relatively low, the seller has less opportunity to benefit from online reviews when it offers an MBG, as compared to a no-refund policy. The impact of online reviews on the competition between the two sellers has a “symmetric effect area,” where reviews may either weaken or intensify the price competition between the two sellers when they both offer a no-refund policy, but always intensify the competition if they both offer an MBG. We have identified the conditions under which online reviews lead to a win-win, or benefit one seller, or present a prisoner's dilemma for the two online sellers. We also show that MBGs at both sellers help mitigate the prisoner's dilemma if the net salvage value at both sellers is sufficiently high.
| Original language | English |
|---|---|
| Article number | 107929 |
| Journal | International Journal of Production Economics |
| Volume | 232 |
| DOIs | |
| Publication status | Published - Feb 2021 |
Bibliographical note
Funding Information:The authors gratefully acknowledge financial support from the Fundamental Research Funds for the Central Universities (China) (Grant No. JBK1805005 ), and the Social Sciences and Humanities Research Council and the Natural Sciences and Engineering Research Council of Canada.
Publisher Copyright:
© 2020 Elsevier B.V.
ASJC Scopus Subject Areas
- General Business,Management and Accounting
- Economics and Econometrics
- Management Science and Operations Research
- Industrial and Manufacturing Engineering
PubMed: MeSH publication types
- Journal Article