Online Transactions and Consumer Transactions Behaviour : Assignment

Added on - 21 Jul 2020

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Strategy & Competition
In online transactions an average customers pays more at the end of transactions than atthe beginning. The retailers and online dealers implements online pricing strategies in order toattract and retain more and more customers. The pricing strategies implemented by the onlineshopping websites depends upon the level of competition. According to the game theory ofeconomies, the pricing strategy of company depends on the pricing strategies of other company.In accordance with this context, this essay aims to provide a hypothesis on online transactionsand consumer transactions behaviour. Covering the aspects and concepts of game theory andgame embedded strategies by Professor Patrick A. McNutt.Economic activity involving online transactions is refereed as sharing economy. It is thepeer to peer sharing of goods and services through online modes and methods (Hamari, Sjöklintand Ukkonen, 2016).In today's world, many organisation incorporating in United Kingdomembarked on selling their products and services online on their owned website. This not only aidin increasing the productivity and profitability of the organisation, but also assist in increasingthe customer base.According to UK Online Shopping and E-Commerce statistics, it wasidentified that approximately 87% of consumers of United Kingdom purchase one product online(Kitonyi, 2017).Terms and conditions of the retailers added various amounts of taxes and exciseon the products and consumer pays more price afterwards. This implies that the online pricingstrategies developed by the online retailers transforms and ambiguous to the customers.Assume that in the global electronic market, economic agents or players, play a twoperson game with each other randomly. In this scenario, the player is sometime buyer andsometime seller, we model the game as systematic game. TTP model states that both the buyerand seller have two strategies available for each business transactions. If buyer query the TTPbefore making online transactions, he or she will get to know the past behaviour and reputationof seller. This will help the buyer to reduce the exposure of risk in online transaction. Buyers andsellers who obtain the digital certificate from the TTP model get a guarantee to some extentabout the price and quality of their trade. Buyers of sellers who did not use TTPs services can becheated for instance, they might get counterfeit product which was not described. In this contextthe average payoff suppose “a” after reducing the fees for using TTP service for online
transaction through TTP is more than the average payoff suppose “b” for online transactionwithout a TTP: a>b (Ba, Whinston and Zhang, 1999).According to the game theory, there is always a conflict and cooperation betweenintelligent rational decision makers.The game theory contends that the concept of “zero sumgame” means that in order for someone to get larger piece of pie another person has to give upsome of their own. It depends on the trust and belief between the person. In this context, win-win scenarios between participants is facilitated by the sharing economy.The game embeddedstrategies proposed by Patrick A. McNutt, states that retailers formulate pricing strategies on thebasis of the pricing strategies of other companies. For example, Company A, sells product A andcompany B sells product B. Both the products are somewhat identical and similar. In thisscenario management of company A, reduce the price of product A by 15% with a belief thatCompany B will not change the price of product. In this way, company A will be able to attractmore and more customers. This is the game strategy which is based on assumptions andobservations.According to Nash Equilibrium, each participate formulate and implementsstrategy while considering opponents choice. He has no incentives, nothing to gain by switchingstrategy (Nash Equilibrium,2017).Many organisations in current economy implements theconcepts of game theory so that they can increase their customer base and improve their andeliminate the competition from the environment. After analysing various shopping websites, itwas identified that rationale customer on an average pays more at the end of online transactions.This is because many organisations formulated certain policies and procedures that increases thefinal price of products and services. These policies can be taxes, delivery charges, excise, valueadded tax, online charges, etc. These policies are formulated by the organisations in order toimprove the effectiveness of the company and online shopping experience (Laudon and Traver,2013).For example, Debenhams Plc implemented competitive pricing strategy in whichcompany determine and set the price of products and services relatively low as compared to itscompetitors like Boden, Tesco, Aldi, etc . This aid in increasing the customers and assists ingrowth and development of the organisation.Due to extra charges and additional fees taken by online shopping websites, the price ofproducts increases at the time of transactions.This implies that due to the policies and
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