Dynamic pricing for new experience products in pre-sale mode with social learning

Abstract

This paper constructs a three-stage dynamic pricing model to investigates a pricing problem of new products launched by an enterprise in the pre-sale mode with social learning (SL). When enterprises launch new products, they usually obtain more consumers' prior beliefs through a pre-sale mode, in which consumers engage in social learning (SL) to update their prior beliefs. The enterprise has to choose to publish all information including deposit amount, product price and preferential discount, either in advance (synchronous pricing strategy) or step by step (responsive pricing strategy). Meanwhile, the consumer can decide whether to purchase the product in the current period or defer it to a second sales period. A differential evolutionary algorithm is used to solve the equilibrium strategy between the enterprise and the consumer to maximize the profit of the enterprise and the utility of the consumer in this paper. Our simulation analysis demonstrates that enterprises may attain greater proactive control and higher expected profits by opting for a responsive pricing strategy under the presence of a social learning (SL) process. As the degree of consumer heterogeneity and the uncertainty of product quality information increase, the advantage of responsive pricing strategies over synchronous pricing strategies becomes more prominent. We further find that the adoption of a synchronous pricing strategy under the presence of a social learning (SL) process necessitates a sacrifice in partial revenue to mitigate the consumers’ propensity for delayed purchase. This effect is particularly pronounced when the patience of consumers and the reputation of the enterprise are relatively poor, leading to greater sacrifices in benefits for the enterprise.