Modeling consumer stickiness in online platform pricing

Motivated by the operational practice of JD.com, China’s largest online retailer, our study delves into the phenomenon of consumer stickiness. It measures the probability that consumers will remain loyal to a specific product, refraining from purchasing alternatives, even in the temporary absence of the focal product. Based on real data from JD.com, we show that consumer stickiness has a significantly positive impact on online sales, which is used to justify our formulation of the demand function in theoretical analysis. Specifically, we adopt a game-theoretical approach to analyze the impact of consumer stickiness on two-period pricing strategies in monopolistic and competitive markets. Findings reveal that incorporating consumer stickiness leads to differentiated pricing strategies, with low-quality products reducing prices in the second period and high-quality products increasing them. Stickiness enhances total sales in monopolistic markets with high-quality products and in competitive markets with high market potential. Furthermore, stickiness contributes to increased revenue and improvements in consumer surplus and social welfare under large or small market conditions, underscoring its strategic importance for pricing and welfare outcomes. These findings contribute valuable insights into the dynamics of online platform competition and highlight the strategic implications of consumer stickiness in influencing pricing and platform revenue.