Dynamic Pricing in B2C Based on Online Product Reviews

To study how e-tailors should fix the price to influence word-of-mouth to maximize profits, this paper comes up with a dynamic pricing model based on online product reviews. Customers base consumption decisions on the principle of utility maximization. A lower price can lead to more positive reviews and improve the utility, but it may reduce the profit. The model gives the optimal pricing strategy for the e-tailor in a duopoly market competing with an offline retailor. The analytical results show with the increase of online reviews, the optimal pricing of the e-tailor increases and the growth rate declines.