Does More Flexible Pricing Always Pay? Profit-Driven Pricing and Market Stability Under Platform Regulation

This paper studies a dynamic price adjustment system in platform markets, where sellers continuously revise prices, and examines its implications for market stability. We develop a platform-led discrete-time Stackelberg game model to describe the evolution of sellers’ prices and price adjustment speeds under bounded rationality. Unlike previous studies that treat adjustment speed as exogenous, we model it as an endogenous state variable shaped by profit incentives, behavioral inertia, and price fluctuations. We derive the interior symmetric equilibrium and show that profit-driven acceleration increases sellers’ adjustment speed. When this speed exceeds the stability threshold, the system may leave the stable region, causing bifurcations and complex dynamics. We then introduce a platform-imposed upper bound on adjustment speeds and demonstrate that appropriate regulation can restore stability while balancing market responsiveness and efficiency. Numerical simulations illustrate that moderate acceleration improves profitability, whereas excessive acceleration can lead to low-profit regimes. Entropy-based metrics are used to quantify system complexity, and an entropy-triggered feedback-control mechanism is proposed to mitigate excessive volatility while maintaining flexibility. Overall, the study highlights the importance of governing adjustment dynamics rather than solely focusing on price levels.