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The optimal pricing decisions for e-tailers with different payment schemes

  • Jing Zhang
  • Na Xu
  • Shizhen BaiEmail author
Article
  • 23 Downloads

Abstract

Along with the quick development of e-commerce, different payment schemes are provided to online consumers to improve their shopping experience. Currently, the payment schemes can be divided into two categories, one is pay-to-order, and the other is pay-on-delivery. Payment scheme directly affects consumers’ behavior and e-tailer’s pricing decision in e-commerce. In this paper, we characterize the consumers’ purchase and returns behavior with consumer utility function, build the e-tailer’s profit functions and solve them to obtain the optimal pricing decisions, both in the condition of pay-to-order and dual scheme (including both pay-to-order and pay-on-delivery). We find that managers can affect consumers’ decision on choosing payment scheme by adjusting the e-tail price. We demonstrate the transfer of payment scheme, along with the transaction cost and return cost. Sensitivity analysis is provided to tell e-commerce managers that they should consider the influence of the e-purchase cost, together with the characteristic of both consumers and products when designing the payment scheme.

Keywords

Pay-to-order Pay-on-delivery E-tail price Consumer behavior Payment scheme 

Notes

Acknowledgement

This work was supported by the grants from the NSFC (71671054 and 7137106) and Shandong Province Social Science Planning Research Project (17DGLJ11).

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2020

Authors and Affiliations

  1. 1.School of BusinessHarbin University of CommerceHarbinChina
  2. 2.School of Business AdministrationShandong Technology and Business UniversityYantaiChina

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