Dynamic Pricing In The Presence Of Word Of Mouth Effect

When consumers purchase products,they always hope to learn from others' evaluation of the products.Prior to the rise of Internet technology,such reference activities among consumers were often limited by the scope of social networks and played a limited role.With the popularity of Internet information,users from all over the world can easily communicate.Before purchasing the desired product,consumers can understand the product review information in various forums and media such as community forums,e-commerce platforms,and Weibo to help them make decisions.The role of word-of-mouth information in consumer purchase decisions is more and more important.On the other hand,with the advancement of science and technology and the development of social economy,the production capacity and management level of enterprises have been greatly improved,the relationship between supply and demand of products and services has been reversed,the era dominated by consumers has come.The competitions among enterprises have been intensified,and product homogeneity has been inevitable.In the new market situation,how to take advantage of the influence of word-of-mouth on consumer purchasing decision to help companies formulate product pricing strategies,even how to use the reputation of product to maintain the market position of the enterprise and maximize the company's revenue in the face of fierce competition.These issues are of great significance to businesses.First of all,this dissertation studies the dynamic pricing of a new product launched by a monopoly company during the two sales periods when there are both strategies and short-sighted consumer and word-of-mouth effects in the market.The word-of-mouth effect means that consumers who purchase products in the first phase of the sales period will affect the utility of potential consumers in the second stage of the market through word of mouth's spreading.And positive influence has been assumed.That is to say,consumers can benefit from learning the word of mouth information.Secondly,this dissertation further studies the issue of dynamic pricing when companies face competitive companies entering the market in the future.It focuses on the impact of competitors' entry on the company and whether the word-of-mouth effect can help companies face the threat of competing companies.The study found that,when the market is monopolized,the impact of the word-of-mouth effect on consumer decision-making will change the pricing strategy for the new product and make the enterprise gain more profit.The existence of the word-of-mouth effect will enable companies to choose more penetration pricing strategies for new products.Firstly,companies introduce the product to the market at a low price,and then appropriately increase the price of the product when the product receives a certain customer base.In the face of threats from competing companies,the company's revenue does not necessarily decrease,in particular,when the word-of-mouth effect is strong,the company's profits may increase,which proves that word-of-mouth plays an important role in maintaining the market position of the enterprise.