Co-opetition strategies of retail platform operations with strategic consumers

Retail platforms are strategically transitioning the market relationships with brand manufacturers from cooperation to co-opetition by introducing private labels of diverse quality. This study investigates the interaction between the consumer strategic characteristic and the platform co-opetition strategy from the perspective of time dimension. The platform can strategically manipulate the co-opetition relationship with the brand manufacturer through the decision of whether and when to introduce a private label product. By restricting the sales period of private label product, the platforms can build a partially competitive relationship with the brand manufacturer. We develop a two-period game-theoretic model to systematically compare the equilibriums of four strategies (i.e., full cooperation, first half co-opetition, second half co-opetition, and full co-opetition) and analyze their impact on participants. Our work focuses on the strategic waiting behavior of consumers and how the interplay of vertical product competition and horizontal firm cooperation affects the performance of firms and consumers. A result reveals that the quality level of the platform’s private label product significantly influences the competitive landscape in the end market. We find that the half co-opetition strategies are dominant when the platform offers a low-quality private label. The interaction between the positive effect of the increase in private label demand and the negative effect of cannibalizing the manufacturer’s product sales leads to this result. A surprising finding is that the platform should adopt the second half co-opetition strategy rather than the first half co-opetition strategy with the relatively low private label quality, which is related to the platform’s positioning: Expanding the market versus capturing profits. Finally, several extensions further validate the robustness of the main conclusions. Our analysis provides valuable insights into the timing of platform implementation of co-opetition strategies.