Title: Role of IT capacity in customer churn for electronic retailers in oligopoly market using game theory approach

Authors: Maryam Esmaeili; Sahar Vatankhah

Addresses: Department of Industrial Engineering, Faculty of Engineering, Alzahra University, Tehran, Iran ' Department of Industrial Engineering, Faculty of Engineering, Alzahra University, Tehran, Iran

Abstract: This paper examines the customer churn for e-retailers in oligopoly markets and simultaneously considers IT capacity and marketing. When customer churn occurs, the customers leave this e-retailer and join other ones. Moreover, the market share of each e-retailer depends on its marketing rate, rival companies, and IT capacity. The competition between the companies is examined in an oligopoly market. The rate of customer reduction is considered to determine the efficient marketing policy leading to maximising each player's profit. The relation between e-retailers is modelled as an infinite horizon, non-cooperative differential game. A differential game theory is employed to obtain the market share, marketing rate, and IT capacity of each e-retailer. Besides, a numerical example and sensitivity analysis are presented to illustrate the proposed model. Finally, it was revealed that the companies do not need to spend money on marketing efforts by prioritising their IT capacity.

Keywords: marketing; customer churn; game theory; IT capacity; market share.

DOI: 10.1504/IJBIS.2024.138050

International Journal of Business Information Systems, 2024 Vol.45 No.4, pp.503 - 518

Received: 26 Apr 2020
Accepted: 08 Mar 2021
Published online: 18 Apr 2024 *

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