Dealership or Marketplace with Fulfillment Services: A Dynamic Comparison

Guokai Li (), Ningyuan Chen (), Guillermo Gallego (), Pin Gao () and Steven Kou ()
Additional contact information
Guokai Li: School of Data Science, Chinese University of Hong Kong, Shenzhen 518172, China
Ningyuan Chen: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Guillermo Gallego: School of Data Science, Chinese University of Hong Kong, Shenzhen 518172, China
Pin Gao: School of Data Science, Chinese University of Hong Kong, Shenzhen 518172, China
Steven Kou: Department of Finance, Questrom School of Business, Boston University, Boston, Massachusetts 02215

Manufacturing & Service Operations Management, 2024, vol. 26, issue 5, 1860-1877

Abstract: Problem definition : We consider two business models for a two-sided economy under uncertainty: dealership and marketplace with fulfillment services. Although both business models can bridge the gap between demand and supply, it is not clear which model is better for the firm or for the consumers. Methodology/results : We show that, whereas the two models differ substantially in pricing power, inventory risk, fee structure, and fulfillment time, both models share several important features with the revenues earned by the firm from the two models converging when the markets are thick. We also show that, for thick markets, there is a one-to-one mapping between their corresponding optimal policies. Managerial implications : Our results provide guidelines for firms entering two-sided markets: when the market is thick, the two business models are similar; when the market is thin, they should carefully inspect a number of market conditions before making the choice.

Keywords: dynamic pricing; business models; dynamic game; Markov perfect equilibrium (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/msom.2022.0253 (application/pdf)

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:inm:ormsom:v:26:y:2024:i:5:p:1860-1877

Access Statistics for this article

More articles in Manufacturing & Service Operations Management from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().