Strategic Investment Decisions of the E-commerce Platforms in Switching BarrierReport as inadecuate




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This paper develops a users’ transferring model to study the impact of the user loyalty heterogeneity on the investment decisions of the E-commerce platforms in switching barrier. We carry out sensitivity analysis of optimal investment in the parameters to explore how to adjust investment decisions based on the change of disloyal users’ proportion when the economic environment changes. We find that the switching cost always makes it beneficial to the leader A; while the high relative investment capability of B decreases its disadvantage and makes its behavior more aggressive. In addition, the user loyalty heterogeneity is beneficial to the superior who has the investment advantage in a profitable market. Specifically, although the investment in switching barrier can relax the competition, high market profitability not only intensifies the competition, but also increases the relative investment advantage, and the follower B may own a comparative advantage and its behavior is aggressive.

KEYWORDS

switching barrier; investment decisions; switching cost; proportion of the disloyal users

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Author: Fusen Wang, Jing Shi, Tiaojun Xiao

Source: http://www.scirp.org/



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