Optimal distribution strategy of coupons on e-commerce platforms: Sufficient or scarce?

Li Hu, Mengwei Zhang and Xin Wen

International Journal of Production Economics, 2023, vol. 266, issue C

Abstract: With the growth of the digital economy, platform-led coupons are becoming an increasingly popular marketing approach. How to optimally design coupon strategies to achieve the coordination between the product merchant and platform has become critical in platform supply chain management. This paper studies a platform-led coupon distribution problem and analyzes the optimal strategies of the platform and merchant: who bears the coupon cost and how many coupons should be offered. We propose a Stackelberg game in which the platform acts as the leader and decides the coupon denomination. Then, the merchant, as the follower, decides the product's selling price. Consumers are divided into high-frequency and low-frequency consumers according to their heterogeneity in consumption frequency. Our analysis shows that when the platform bears the cost, under the combined effect of the highest denomination and the highest product selling price, the platform and the merchant can realize coupon cooperation under the supply-adequate strategy, which means the number of coupons can satisfy the shopping frequency of all consumers. When the merchant bears the cost, the platform still tends to distribute more coupons. However, the merchant will suffer due to the losses caused by the coupon costs. To reach coupon cooperation, the platform can give up the excessive exploitation of the merchant by adjusting the coupon denomination.

Keywords: Coupon strategy; Coupon quantity; Cost bearing structure; E-commerce platform; Stackelberg game (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:266:y:2023:i:c:s0925527323002633

DOI: 10.1016/j.ijpe.2023.109031

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