Platform Credit, Advertising, and Customer Capital

Matthias Efing, Yi Huang, Ruobing Han, Qi Sun and Daniel Yi Xu
Additional contact information
Yi Huang: Bank for International Settlements (BIS)
Ruobing Han: The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen)
Qi Sun: Shanghai University of Finance and Economics
Daniel Yi Xu: Duke University

No 1542, HEC Research Papers Series from HEC Paris

Abstract: Advertising plays a particularly crucial role in online marketplaces, where thousands of merchants offer similar products and compete for visibility and consumer attention. This study theoretically and empirically demonstrates that merchants on e-commerce platforms often engage in "underadvertising" due to financial constraints. By leveraging quasi-random variation in merchants' access to credit from a major platform lender, we establish that alleviating financial constraints leads to substantial increases in advertising expenditures, enhanced shop visibility among customers, and ultimately, accelerated sales growth. Notably, high-quality merchants with top customer ratings are especially likely to utilize platform credit to invest in advertising.

Keywords: platform credit; platform lending; e-commerce (search for similar items in EconPapers)
JEL-codes: G21 G23 L10 L81 M30 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2025-04-01
New Economics Papers: this item is included in nep-ind and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1542

DOI: 10.2139/ssrn.5190309

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