Impact of ‘Small World' Social Network of Consumers on Pricing Decision in Duopoly Market

Authors

Li Feng, 1. School of Business Administration, South China University of Technology, Guangzhou 510640, China; ;
Wei Ying, 2. Department of Business Administration, Jinan University, Guangzhou 510632, China;

Abstract

Abstract: Noticing the influences of friends on consumers purchasing decisions, the impact of ‘small world' social network on price competition in a duopoly hotelling model was studied. A multi-agent based modeling approach was proposed to represent the consumers' decisions, which related to their connected friends in a social network, as well as the firms' pricing decisions. Simulation results reveal that the ‘small world' social network has a significant impact on the competing firms' pricing decisions. In specific, with the increasing number of consumers who are impacted by their friends, or the increasing likelihood of following friends' decisions, consumers then behave less rational. Both firms benefit from such bounded rationality and gain profits by raising their selling prices. In addition, one firm may benefit more than the other due to the network structure of the ‘small world'. As a result, policies of sales effort investment are also different for the two competitors.

Recommended Citation

Feng, Li and Ying, Wei (2020) "Impact of ‘Small World' Social Network of Consumers on Pricing Decision in Duopoly Market," Journal of System Simulation: Vol. 29: Iss. 6, Article 3.
DOI: 10.16182/j.issn1004731x.joss.201706003
Available at: https://dc-china-simulation.researchcommons.org/journal/vol29/iss6/3

First Page

1174

Revised Date

2016-01-03

DOI Link

https://doi.org/10.16182/j.issn1004731x.joss.201706003

Last Page

1185

CLC

TP391.9

Recommended Citation

Li Feng, Wei Ying. Impact of ‘Small World' Social Network of Consumers on Pricing Decision in Duopoly Market[J]. Journal of System Simulation, 2017, 29(6): 1174-1185.

DOI

10.16182/j.issn1004731x.joss.201706003