Research On User Participation,pricing Strategy And Value-Added Investment Of Smart Homing Platform

The rapid advancement of Io T and information technology has propelled the transformation and innovation of the smart home industry.Communication systems connect sensors and electronic devices,enabling users to remotely monitor and control various functions,including temperature,safety,and energy efficiency.Thanks to robust backing from national policies,the industry has witnessed substantial growth in recent years,attracting the interest of both businesses and scholars.Nevertheless,the industry continues to encounter challenges,including varying consumer acceptance of new technologies and ethical concerns,such as digital privacy,resulting in a range of operational issues.For instance,how pricing decisions impact the smart ecosystem,how platforms determine their investments in value-added services and choose suitable sales models,and how smart home businesses address competitive challenges through pricing,investments,and compatibility choices are questions we seek to answer through the construction of analytical models.Our goal is to examine how factors like consumer diversity,market structure,digital privacy,and manufacturers’ learning capabilities influence the development of smart ecosystems,pricing choices,and two-sided value-added investments while elucidating the underlying mechanisms.This paper,using the framework of two-sided markets and platform economies,develops a game-theoretical model to investigate these aspects.Study 1 creates a choice model for accessing a platform’s smart ecosystem and compares pricing and ecosystem scale under two modes:cloud-to-cloud access mode and direct-in access mode.The results show that in the cloud-to-cloud mode,if one side benefits from enhanced network externalities,the platform is better off reducing the price for the other side.In the direct-in mode,it may be optimal to increase the price for one side in response to the increasing network effect benefits for the other side.The choice between these two modes is influenced by the twosided network effect and access cost.Specifically,the platform prefers the direct-in mode when access costs are low,as it leads to higher profits and greater social welfare.Moreover,when the cost density is significant,integration investment maximizes cost savings for manufacturers.Conversely,the cloud-to-cloud mode can promote the smart ecosystem when manufacturers face high access costs.Additionally,this study explores the impact of commission ratio,cost density,and other factors on two-sided pricing,smart ecosystem scale,profit,and social welfare.Study 2 develops an analytical model to investigate the essential trade-off between quality investment and two-sided subsidies,as well as the coordinating impact of these two strategies.We conduct a comprehensive analysis in three distinct scenarios: monopoly,duopoly,and partial multihoming.The findings suggest that when one side benefits from network externalities,the platform should not reduce charges to the other side.In cases where consumers are single-homing while manufacturers are multihoming,the platform will still provide subsidies to both sides because of the commission revenue.However,when consumers are multihoming,the two sides of the same platform are no longer interdependent,and the subsidy strategy for the platform may be inefficient,depending on consumer heterogeneity.At the strategic level,platform managers must strike a balance between nurturing a thriving smart ecosystem,ensuring high hardware performance,and maintaining a moderately sized ecosystem.Study 3integrates the findings of Study 1 and Study 2 into a unified framework to analyze the selection of value-added investment strategies by two competing platforms.In this scenario,content developers benefit from modularized code and the ability to participate in multiple ecosystems concurrently.The platforms should not lower consumer prices even when they are single-homing.Another notable discovery is that the performance investment strategy prevails,despite the high cost reduction efficiency.This is attributed to the non-additive nature of the cost reduction effect.While some of our conclusions align with previous studies,the underlying mechanism has undergone a fundamental shift from the asymmetric network effect to the multihoming developers’ "learning by doing" ability.Lastly,we examine how consumers’ diverse preferences influence the platforms’ strategic choices and pricing decisions.By focusing on consumers’ sensitivity to digital privacy,Study 4develops a game-theoretical model involving a manufacturer,an ecommerce platform,and consumers to investigate the interplay among the manufacturer’s investments in smart environmental functionality,choice of sales mode,and pricing.The findings reveal that manufacturers consistently benefit from such investments.If there is a significant number of data-sensitive consumers,manufacturers will subsidize the platform for the purchase of smart devices and capitalize on cross-selling.In cases where the commission ratio is low,the equilibrium strategy transitions from the agency selling mode to wholesale pricing due to the introduction of smart environmental functionality investments.Furthermore,the commission ratio,consumers’ perceived environmental value,and unit carbon emissions collectively influence social welfare.Interconnectivity faces obstacles posed by ecosystem barriers,compelling platforms to make a crucial choice between developing product ecosystems and competing in the market.Consequently,Study 5delves into the compatibility decisions made by smart home platforms in a competitive landscape.It employs a game-theoretical model involving an incumbent,an entrant,and consumers to investigate the influence of consumer privacy concerns,compatibility costs,and competition intensity on the incumbent’s compatibility choices,ecosystem development,pricing strategies,consumer satisfaction,and overall social welfare.The findings indicate that an increase in network effects doesn’t necessarily empower incumbent firms to raise prices and attain higher marginal profits,primarily due to privacy concerns.Although competitive pressures may lead to price reductions,heightened network effects effectively deter price wars,benefiting both competing firms through market segment synergies.Moderate competition proves advantageous for smart home firms when considering compatibility decisions for building smart ecosystems,as it enhances overall social welfare.In summary,this paper explores the development of ecosystems,pricing strategies,and value-added investments of smart home companies from diverse angles.The objective is to enhance existing theories and offer a theoretical basis with managerial insights to advance the smart home industry.