Research on Service-Driven Benign Market with Platform Subsidy Strategy

Shuilin Liu, Xudong Lin (), Xiaoli Huang, Hanyang Luo and Sumin Yu
Additional contact information
Shuilin Liu: Institute of Big Data Intelligent Management and Decision, College of Management, Shenzhen University, Shenzhen 518060, China
Xudong Lin: Institute of Big Data Intelligent Management and Decision, College of Management, Shenzhen University, Shenzhen 518060, China
Xiaoli Huang: Institute of Big Data Intelligent Management and Decision, College of Management, Shenzhen University, Shenzhen 518060, China
Hanyang Luo: Institute of Big Data Intelligent Management and Decision, College of Management, Shenzhen University, Shenzhen 518060, China
Sumin Yu: Institute of Big Data Intelligent Management and Decision, College of Management, Shenzhen University, Shenzhen 518060, China

Mathematics, 2023, vol. 11, issue 2, 1-21

Abstract: The benign consumption of two-sided markets and the quality improvement of the supply side is the core of the sustainable development of platform ecology. This paper discusses how the platform uses personalized service values to influence the decision making of manufacturers and consumers, thus improving the health development of the platform ecosystem. By constructing the vertical differentiation model, we find that, different from the unified pricing strategy in the benchmark market, manufacturers in the platform market can implement personalized pricing, according to the different types of consumers’ quality preferences. When the platform service value is less than the product cost difference between manufacturers, low-quality manufacturers may benefit from the platform. Meanwhile, when the platform service value is greater than the product cost difference between manufacturers, the lemon market may appear and platforms should set the differentiated subsidy strategy according to the type of market consumers; this is a dominant strategy. In addition, when the number of consumers with low-quality demand in the market is large, the platform’s subsidies for high-quality products to consumers will guide consumers to buy high-quality products; this will not only promote the development of the benign market, but also improve the platform’s revenue. Finally, the sensitivity analysis shows that the platform service value has a U-shaped impact on the platform revenue and an inverted U-shaped impact on the manufacturers’ revenues.

Keywords: consumer type; platform service value; pricing; vertical differentiation model; benign market (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/11/2/325/pdf (application/pdf)
https://www.mdpi.com/2227-7390/11/2/325/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:11:y:2023:i:2:p:325-:d:1028739

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().