The Influence of Third-party E-Commerce Platform Price Limits on the Dual-Channel Strategy of Manufacturers

Wang Cong (), Yang Huifang () and Yang Deli ()
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Wang Cong: Shipping Economics and Management College, Dalian Maritime University, Dalian, 116024, China
Yang Huifang: Shipping Economics and Management College, Dalian Maritime University, Dalian, 116024, China
Yang Deli: Faculty of Management and Economics, Dalian University of Technology, Dalian, 116024, China

Journal of Systems Science and Information, 2019, vol. 7, issue 2, 173-186

Abstract: Powerful platform operators always set price limits for sellers on the platform. This paper establishes Stackelberg game models according to two pricing models when the manufacturer enters the third-party e-commerce platform and sells products online. The first is a seller-pricing model in which the manufacturer decides the online price. The second is a platform-pricing model in which the platform decides the online price. We obtain the equilibrium results for these two models and the condition that allows the manufacturer to adopt the dual-channel strategy by comparing the operation decisions and performance of supply-chain members in the two models. Results show that the dual-channel strategy of the manufacturer always decreases the profit of the traditional retailer. In comparison with the seller-pricing model, the platform-pricing model always erodes parts of the manufacturers profit obtained by the dual-channel strategy. The manufacturer will pass on the partial loss to the retailer using relative leadership in the platform-pricing model, which renders the profit of the retailer lower than that in the seller-pricing model. Also, price limits do not always bring the platform more profits; sometimes the platform is forced to set a low price.

Keywords: third-party platform; price cap; the manufacturer; dual-channel strategy (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:7:y:2019:i:2:p:173-186:n:6

DOI: 10.21078/JSSI-2019-173-14

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