Subsidize or Not: The Competition of Credit Card and Online Credit in Platform-based Supply Chain System

Credit purchasing has seen dramatic growth recently, stimulating online platforms to provide online credit services in competition with the credit card. We build a game-theoretical model to explore the platform's credit entry strategy when facing the credit card competition. Consumers differ in their credit card ownership and disposable personal incomes (DPI), and perceive a hassle cost of the credit purchase. We find that online credit offering brings an increased retail price. When the proportion of credit card ownership is high, the bank and platform subsidize consumers when the credit misfit cost is low, but charge an interest rate otherwise in an integrated system where the platform acts as a seller. However, the platform will never subsidize consumers in independent system where the retailer sells through the platform. The platform will enter the credit market only when the fixed entry cost is sufficiently low in integrated system, but only when the commission fee or misfit cost is large in independent system. When the proportion of credit card ownership is low, the platform will subsidize consumers when consumer dispersion in DPI is large or misfit cost is low. In addition, the platform has a high willingness to choose the entry strategy when the commission fee is large or misfit cost is low in independent case. Discussion and extension verify the robustness of basic model.