Evolutionary Game Analysis of Online and Offline Drug Retailer Competition Based on Network Externalities

Abstract

Network externality is an important feature of the era of network economy. The competition between online and offline retail pharmacies caused by network externality is getting fiercer and fiercer. In this context, we studied the long-term market competition evolution of two-channel retail pharmacies under the network external environment, in order to obtain higher profits, two-channel retail pharmacies prefer to choose profit maximization marketing strategy or market share maximization marketing strategy. Using evolutionary game theory, an evolutionary game model of two-channel retail pharmacies was established. Through the establishment of the model, obtain the payment matrix of different marketing strategies selected by the two-channel retail pharmacies and the evolution and stability of the selection of marketing strategies. The results show that when the strength of the network externality is within a certain range, the traditional retail pharmacies with higher marketing cost choose to pursue the profit maximization strategy, while online pharmacy with lower marketing costs choose market share maximization strategy to achieve greater profits; when the network externality is large, in order to maintain a certain market share in the long-term market evolution, the traditional retail pharmacy with high marketing cost chooses to pursue the market share maximization marketing strategy in order to obtain greater profits, while the online pharmacy with low marketing cost chooses to profit from the profit maximization marketing strategy.

A game theory approach to selecting marketing-mix strategies

“…The first strategy offers the product with supreme quality by procuring it from the main powerful supplier as a non-cooperative Stackelberg supply chain model in which the supplier plays a leader and the e-tailor is a follower; the second strategy offers the product from a less popular brand as an assortment planning problem model while considering utility degradation of providing alternative brand to the customers. The long-term market competition evolution of two-channel retail pharmacies under the network external environment is studied to obtain higher profits; two-channel retail pharmacies prefer to choose profit maximization marketing strategy or market share maximization marketing strategy (Li and Huang, 2019). The game theory combined with Monte Carlo simulation modeling is used to analyze different retail marketing strategies, in particular, using payoff matrices for modeling the likely outcomes from different retail marketing strategies (Taylor et al, 2019).…”

Online Food Delivery Platforms and Restaurants’ Interactions in the Context of the Ban on Using Single-Use Plastics

“…[21] and [34] are similar to our study; all these studies employ evolutionary game theory to analyze OFD-related problems, while the two studies focus on food quality and food waste recycling, respectively. In addition, evolutionary game theory is employed in modeling various problems, e.g., retailer competition [35], resource management [36], and bid evaluations [37], [38]. All these studies contribute to our study.…”

Cooperation or Conflict in Doctor-Patient Relationship? An Analysis From the Perspective of Evolutionary Game

“…According to the previous study [49], [50], we can use numerical simulation to verify the feasibility of our model. In our model, we use the software MATLAB R2018b to do the simulation and set the initial parameters as follows: The resources invested by doctors and patients are i = 2 and j = 2; initial ratio of two types of strategies between doctors and patients is x 0 = y 0 = 0.5; we keep above parameters unchanged and keep other parameters changed: The information asymmetry coefficient of doctor and patient, the degree of trust of doctor and patient, the moral hazard coefficients of the doctor and patient.…”