A Signaling Advertising Model Between an Intelligent Consumer and Two E-tailers

Authors

  • M. Esmaeili Alzahra University
  • M. Masoumirad Alzahra University

Abstract

Nowadays, by increasing sales forces' cost, trades shift more to e- business. In this paper, we present a signaling internet business model as a multi stage game. We consider two e-tailers and one intelligent consumer as players. The e-tailers can advertise or not, while, the consumer can search or not. The communication between one of the e-tailers and the consumer and also the interaction between the two e-tailers are considered as sequence at stages zero and one. We obtain Nash and Separating Equilibrium for each stage. Finally, Nash Equilibrium is obtained at stage two based on the historical impact of the players' actions. We show that in the signaling models when the game is not single shot, the good reputation is as important as advertising to signal about the product quality. In addition, searching and advertising costs have a great impact on the consumer and e-tailers' decisions.

Keywords:

Advertising, B2C internet business models, Multi stage games, Reputation

Downloads

Download data is not yet available.

References

Adriani, F. and L. G. Deidda (2011). Competition and the signaling role of prices. International journal of industrial organization, 29(4), 412–425.

Adriani, F. and L. G. Deidda (2009). Price signaling and the strategic benefits of price rigidities. Games and economic behavior, 67, 335–350.

Anand, B. and R. Shachar (2007). (Noisy) Communications. Quantitative marketing and economics, 5(3), 211–232.

Anand, B. and R. Shachar (2009). Targeted advertising as a signal. Quantitative marketing and economics, 7, 237–266.

Beltran, C., Zhang, H., Blanco, L. A. and J. Almagro (2013). Multistage multiproduct advertising budgeting. European Journal of Operational Research, 225, 179–188.

Bester, H. and K. Ritzberger (2001). Strategic pricing, signaling, and costly information acquisition. International journal of industrial organization, 19, 1347–1361.

Christou, C. and N. Vettas (2006). On informative advertising and product differentiation. International journal of industrial organization, 19, 1347–1361.

Clark, R. and I. Horstmann (2005). Advertising and coordination in markets with consumption scale effects. Journal of economics and management strategy, 14(2), 377–401.

Daughety, A. F. and J. F. Reinganum (2007). Competition and confidentiality: signaling quality in a duopoly when there is universal private information. Games and economic behavior, 58, 94–120.

Deza, A., Huang, Kai. and R. Metel (2015). Chance Constrained Optimization for Targeted Internet Advertising. Omega, 53, 90–96.

Esmaeili, M., and Aryanezhad, M. and P. Zeephongsekul (2009a). A game theory approach in sellerbuyer supply chain. European journal of operational research, 195, 442–448.

Esmaeili, M., and Abad, P. and M. Aryanezhad (2009b). Seller-buyer relationship when end demand is sensetive to price and promotion. Asia-Pacific journal of operational research, 26, 1–17.

Fluet, C. and P. Garella (2002). Advertising and prices as signals of quality in a regime of price rivalry. International journal of industrial organization, 20, 907–930.

Horstmann, I. and G. MacDonald (2003). Is advertising a signal of product quality? Evidence from the compact disk player, 1983-1992. International journal of industrial organization, 21, 317–345.

Kaya, A. (2009). Repeated signaling games. Games and economic behavior, 66, 841–854.

Kim, J. (2000). Product compatibility as a signal of quality in a market with network externalities. International journal of industrial organization, 20, 949–964.

Kirmani, Amna. and R. Rao. Akshay (2000). No Pain, No Gain: A Critical review of the literature on signaling unobservable product quality. Journal of marketing, 64(2), 66–79.

Lee, B., Ang, L. and C. Dubelaar (2005). Lemons on web: A signaling approach to the problem of trust in Internet commerce. Journal of economic psychology, 26, 607–623.

Linnemer, L. (2001). Price and advertising as signals of quality when some consumers are informed. International journal of industrial organization, 20, 931–947.

Milgrom, P. and J. Roberts (1986). Price and advertising signals of product quality. Journal of political economy, 94(4), 796–821.

Mitra, D. and S. Fay (2010). Managing service expectation in online markets: A signaling theory of e-tailer pricing and empirical tests. Journal of retailing, 86, 184–199.

Muzellec, L., Ronteau, S. and M. Lambkin(2015). Two-sided Internet platforms: A business model lifecycle perspective. Industrial Marketing Management, 45, 139–150.

Nelson, P. (1974). Advertising as information. Journal of political economy, 82(4), 729–754.

Pei, Z. and Paswan, A. and R. Yan(2014). E-tailer's return policy, consumer's perception of return policy fairness and purchase intention. Journal of Retailing and Consumer Services, 21, 249–257.

Roddie, C. (2010). Theory of signaling games. Oxford: Nuffield College.

Sahuguet, N. (2011). A model of repeat advertising. Economic letters, 111, 20–22.

Schmalensee, R. (1978). A model of advertising and product quality. Journal of political economy, 86(3), 485–503.

Sobel, J. (2007). Pricing strategy, quality signaling, and entry deterrence. University of California: epartment of economics.

Thomas, L., Shane, S. and K. Weigelt (1998). An empirical examination of advertising as a signal of product quality. Journal of economic behavior and organization, 37, 415–430.

Utaka, A. (2008). Multistage multiproduct advertising budgeting. International journal of industrial organization, 26, 878–888.

Downloads

Published

2022-04-17

How to Cite

Esmaeili , M. ., & Masoumirad, M. . (2022). A Signaling Advertising Model Between an Intelligent Consumer and Two E-tailers. Contributions to Game Theory and Management, 10. Retrieved from https://gametheory.spbu.ru/article/view/13249

Issue

Vol. 10 (2017)

Section

Articles

License

Articles of "Contributions to Game Theory and Management" are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.