Equilibrium Pricing, Advertising, and Quality Strategies in a Platform Service Supply Chain

Yong He, Yanan Yu, Zhongyuan Wang and Henry Xu

Chapter 9 in Technology-Driven Supply Chain Management in Industrial 4.0 Era:Resilience, Responsiveness and Reliability, 2025, pp 245-277 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Online-to-Offline service platforms are rising with the development of e-commerce and the increasing need for service. Taking the hospitality and tourism industries as typical examples, this paper considers a platform service supply chain, where a leading hotel is responsible for offline service, and a following platform is in charge of pricing, online service, and advertising investment. Three decision modes (i.e., decentralized, cost-sharing, and integrated) for the platform service supply chain are investigated. We derive the optimal service levels for the hotel and the platform, advertising investment, and retail price in each mode. Our analyses indicate that perceived service quality and brand image vary over time, and they gradually converge to a steady-state. The cost-sharing mode can be achieved if the hotel can obtain enough profit per unit. Once the cost-sharing mode is achieved, it can help improve perceived service quality and brand image, which further increases both the hotel and the platform’s profits. However, the integrated mode generates the best-perceived service quality, brand image, supply chain performance, and the lowest price.

Keywords: Supply Chain; Digitalization; New Technology; Resilience; Responsiveness; Reliability (search for similar items in EconPapers)
JEL-codes: L14 L23 O33 (search for similar items in EconPapers)
Date: 2025
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