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The Influence of Third-party E-Commerce Platform Price Limits on the Dual-Channel Strategy of Manufacturers

Author

Listed:
  • Wang Cong
  • Yang Huifang

    (Shipping Economics and Management College, Dalian Maritime University, Dalian, 116024, China)

  • Yang Deli

    (Faculty of Management and Economics, Dalian University of Technology, Dalian, 116024, China)

Abstract

Powerful platform operators always set price limits for sellers on the platform. This paper establishes Stackelberg game models according to two pricing models when the manufacturer enters the third-party e-commerce platform and sells products online. The first is a seller-pricing model in which the manufacturer decides the online price. The second is a platform-pricing model in which the platform decides the online price. We obtain the equilibrium results for these two models and the condition that allows the manufacturer to adopt the dual-channel strategy by comparing the operation decisions and performance of supply-chain members in the two models. Results show that the dual-channel strategy of the manufacturer always decreases the profit of the traditional retailer. In comparison with the seller-pricing model, the platform-pricing model always erodes parts of the manufacturers profit obtained by the dual-channel strategy. The manufacturer will pass on the partial loss to the retailer using relative leadership in the platform-pricing model, which renders the profit of the retailer lower than that in the seller-pricing model. Also, price limits do not always bring the platform more profits; sometimes the platform is forced to set a low price.

Suggested Citation

  • Wang Cong & Yang Huifang & Yang Deli, 2019. "The Influence of Third-party E-Commerce Platform Price Limits on the Dual-Channel Strategy of Manufacturers," Journal of Systems Science and Information, De Gruyter, vol. 7(2), pages 173-186, April.
    • Handle: RePEc:bpj:jossai:v:7:y:2019:i:2:p:173-186:n:6
    DOI: 10.21078/JSSI-2019-173-14
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    References listed on IDEAS

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