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Updated: Mar 31, 2026
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The Joint Effect of Social Comparison and Social Distance on Evaluation of Intertemporal Choice Outcomes in Event-related Potential Studies
Published on: August 25, 2023
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Sellers' Peer Comparison Under Uncertainty in Online Marketplace
Yun Zhou1, Zhoupeng Jack Zhang2, Ming Hu3
1DeGroote School of Business, McMaster University, Hamilton, ON, Canada.
Production and Operations Management
|March 30, 2026
Summary
Peer pressure in online marketplaces can intensify price competition, lowering seller profits but benefiting consumers. This occurs because sellers balance profit motives with social comparison, influenced by market uncertainty and their desire to outperform rivals.
Area of Science:
- Behavioral economics
- Online marketplace dynamics
- Game theory
Background:
- Online platforms often feature performance comparison tools for sellers.
- Sellers' operational decisions may be influenced by social comparison and peer performance.
- Understanding these behavioral aspects is crucial for marketplace design.
Purpose of the Study:
- To develop and analyze a price competition model incorporating peer comparison among sellers.
- To investigate how sellers' utility, considering both profit and social comparison, affects market outcomes.
- To determine the conditions under which peer comparison is pro-competitive or anti-competitive.
Main Methods:
- A theoretical price competition model with two sellers offering substitutable products.
- Sellers maximize expected total utility, including profit and peer comparison payoff (behind-aversion and ahead-seeking).
- Analysis of how market uncertainty influences the impact of peer comparison on competition.
Main Results:
- Peer comparison is not always pro-competitive; ahead-seeking behavior can be anti-competitive under high market uncertainty.
- Market uncertainty amplifies performance disparity, impacting sellers more than expected gaps.
- Peer comparison intensifies price competition, reducing seller profits and platform revenue while benefiting consumers.
Conclusions:
- Sellers' behavioral regularities, like social comparison, significantly impact online marketplace operations.
- Marketplace designs should consider the nuanced effects of peer comparison and market uncertainty.
- Insights inform strategies for algorithmic transparency, information sharing, and platform management.
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