The Effect Of Social Comparison On Ordering And Pricing Decisions:An Experimental Study

Social comparison is a natural tendency in human beings.This paper investigates how social comparison affects ordering and pricing decisions with considering the heterogeneity of individuals from the aspect of gender.Research on the effect of social comparison on ordering decisions is based on newsvendor model.We have three findings in this setting.Firstly,when making order decisions,subjects are more likely to chase prior quantities,that is,subjects adjust their order quantities towards prior order quantities,anchoring on the prior realized demand.Secondly,when two newsvendors of the same gender compare with each other,the order quantity of the newsvendor whose order quantity is originally closer to expected profit-maximizing quantity will be slightly away from the expected profit-maximizing quantity,while the order quantity of the newsvendor whose order quantity is originally more away from the expected profit-maximizing quantity will be much closer to the expected profit-maximizing quantity.In other words,the extent of the increase of decision deviation is much less than that of the decrease of decision deviation.As a result,social comparison mitigates the pull-to-center effect.Thirdly,same-gender social comparison mitigates subjects' decision deviation both in high-and low-profit margin settings,but cross-gender social comparison only mitigates the decision deviation of one side both in high and low profit-margin settings,the other side unaffected.Research on the effect of social comparison on the pricing decisionsis based on a one-supplier and two-retailer supply chain.There are two types of social comparison in this setting,distributional social comparison and peer-induced social comparison.The former refers to the social comparison between a supplier and a retailer and the latter refers to the social comparison between two retailers.The four findings are as follows.Firstly,distributional social comparison,supplier's comparison with retailers,is negatively related to the supplier's profit because distributional social comparison makes retailers increase retail prices.Secondly,peer-induced social comparison is positively related to the supplier's profit because peer-induced social comparison leads retailers to decrease retail prices.Thirdly,peer-induced social comparison is more salient than distributional social comparison.Lastly,distributional social comparison among male subjects is more intensive than that among female subjects.