Does the price protection policy work? Research on purchasing behavior of strategic consumers on e-commerce platform

What the paper says

Purpose This study aims to investigate the impact of price protection policies on sellers’ pricing and profits on e-commerce platforms, and to analyze the effectiveness of these policies under different scenarios. The goal is to provide sellers with a basis for their pricing strategies and assist them in deciding whether to implement price protection policies. Design/methodology/approach This paper constructs a two-period choice model by using the concept of rational expectations equilibrium, and analyzes factors such as the purchase decisions of strategic consumers, demand and seller profits. The research method includes a profit comparison under four scenarios: the benchmark scenario (B), considering only network externalities (N), considering only price protection policies (P) and considering both network externalities and price protection policies (NP). Findings By comparing profits across different scenarios, the study finds that price protection policies positively affect sellers’ pricing and profits under specific conditions. The study identifies the conditions under which price protection policies are effective. Research limitations/implications The limitations of this study lie in considering only four scenarios. Future research could expand to include more variables, such as other consumer behavior patterns. Practical implications The findings offer valuable insights for e-commerce platform sellers in formulating pricing strategies and implementing price protection policies. Originality/value The originality of this paper lies in considering strategic consumers and network externalities. It fills a research gap in the field of e-commerce pricing.