Establishment of the Utility Model of Both the Insensitive and Sensitive E-shoppers from the Perspective of Transaction Cost

Abstract

Abstract:

Amount of transaction cost is an importa nt factor that consumers consider in deciding whether or not to buy a product online. From the perspective of transaction cost, this paper analyses the impact of risk cost, paying cost and evaluating cost on product utility perceived by consumers. After constructing the loss functions of product value resulting from the three costs, the paper establishes a utility model of both insensitive and sensitive online shoppers, and studies the changes of consumer perceiving product utility influenced by website repute, product brand, price and quality. The results indicate no matter whether consumers are sensitive or insensitive, their product utility and marginal utility all reflect similar changing trend under effect of the variables above. With the enhancement of website repute, product brand and quality, product utility of insensitive consumers and sensitive consumers increases too, however marginal utility of product decrease. With the rise of product price and transportation cost, product utility perceived by insensitive and sensitive consumers all descend. But, since sensitive consumers are more sensitive to costs, their changing velocity of product utility and marginal utility is all greater than that of insensitive consumers. Finally, the paper provides suggestions on Internet marketing strategies based on the research results.

Key words: transaction cost, utility, insensitive e-shopper, sensitive e-shopper

Wang Chong, Xiao Jiuling. Establishment of the Utility Model of Both the Insensitive and Sensitive E-shoppers from the Perspective of Transaction Cost[J]. , 2018, 30(6): 104-111.

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