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A Theoretical Analysis of the Pricing and Advertising Strategies with Lévy-Walking Consumers

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School of Management, The State Key Lab for Manufacturing Systems Engineering, The Key Lab of the Ministry of Education for Process Control & Efficiency Engineering, Xi’an Jiaotong University, Xi’an 710049, China
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Author to whom correspondence should be addressed.
Academic Editor: Eduardo Álvarez-Miranda
J. Theor. Appl. Electron. Commer. Res. 2021, 16(6), 2129-2150; https://doi.org/10.3390/jtaer16060119
Received: 9 July 2021 / Revised: 10 August 2021 / Accepted: 24 August 2021 / Published: 27 August 2021
(This article belongs to the Special Issue Emerging Topics in Omni-Channel Operations)
The pervasive adoption of mobile devices and proximity technologies enables firms to trace consumers’ trajectories and locations. This connects firms’ marketing and operations strategies more tightly with consumer mobility. In this paper, we propose a novel analytical model to examine the economic effects of consumer mobility on pricing and advertising strategies by incorporating consumers’ Lévy-walking behavior into advertising economics models. We ascertain the convergent effect of consumer mobility, i.e., consumers’ convergence to a firm leads to higher product price and advertising level. Meanwhile, it improves social welfare by increasing firm profit and consumer surplus. More interestingly, we find that consumers’ average movement distance (AMD) has opposing influences in pricing and advertising strategies. Specifically, longer AMD strengthens the convergent effect on advertising strategy but weakens that on pricing strategy. Finally, we also conduct a numerical analysis to uncover the impacts of the presence of proximity technologies on advertising outcomes. The results of this paper provide advisable guidance to firms on how to craft and adjust pricing and advertising strategies in accordance to consumer mobility. Moreover, the results present insights on welfare implications of informative advertising from the perspective of consumer mobility. View Full-Text
Keywords: advertising strategy; consumer behavior; proximity technologies; human mobility; Lévy walks advertising strategy; consumer behavior; proximity technologies; human mobility; Lévy walks
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MDPI and ACS Style

Wang, W.; Li, G. A Theoretical Analysis of the Pricing and Advertising Strategies with Lévy-Walking Consumers. J. Theor. Appl. Electron. Commer. Res. 2021, 16, 2129-2150. https://doi.org/10.3390/jtaer16060119

AMA Style

Wang W, Li G. A Theoretical Analysis of the Pricing and Advertising Strategies with Lévy-Walking Consumers. Journal of Theoretical and Applied Electronic Commerce Research. 2021; 16(6):2129-2150. https://doi.org/10.3390/jtaer16060119

Chicago/Turabian Style

Wang, Wei, and Gang Li. 2021. "A Theoretical Analysis of the Pricing and Advertising Strategies with Lévy-Walking Consumers" Journal of Theoretical and Applied Electronic Commerce Research 16, no. 6: 2129-2150. https://doi.org/10.3390/jtaer16060119

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