IDEAS home Printed from https://ideas.repec.org/a/spr/infotm/v24y2023i4d10.1007_s10799-021-00331-x.html
   My bibliography  Save this article

Innovation investment and subsidy strategy in two-sided market

Author

Listed:
  • Man Wang

    (China Center for Information Industry Development)

  • Honghui Deng

    (University of Nevada Las Vegas)

  • Keong G. Leong

    (California State University Dominguez Hills)

Abstract

This paper investigates two competitive strategies from two-sides of the e-commerce platform, that is, innovation investment on seller side and product subsidy investment on consumer side. We take competition intensity on seller side into account and analyze how consumer behaviors affect the platform’s strategy under three scenarios: (1) single purchase on single platform(S); (2) single purchase on multi-platforms(M); (3) repeat purchase on single platform (R). The results revel that the innovation investment for sellers is better off in S scenario. However, when the transfer cost is low, taking subsidy strategy is more profitable for the platform in R scenario. If the internal price competition is not sufficiently fierce, subsidy strategy is an efficient approach to reduce the price in M scenario. It is surprising that if the seller’s innovation capability is sufficiently high, the innovation investment strategy dominates no matter what consumer behaviors are. Moreover, how much the platform invests on the seller’s innovation is independent on the consumer’s behavior. These findings have practical managerial insights for the manager of platforms.

Suggested Citation

  • Man Wang & Honghui Deng & Keong G. Leong, 2023. "Innovation investment and subsidy strategy in two-sided market," Information Technology and Management, Springer, vol. 24(4), pages 337-351, December.
    • Handle: RePEc:spr:infotm:v:24:y:2023:i:4:d:10.1007_s10799-021-00331-x
    DOI: 10.1007/s10799-021-00331-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10799-021-00331-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10799-021-00331-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:infotm:v:24:y:2023:i:4:d:10.1007_s10799-021-00331-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.