A Biform Game Approach to Store Brand Introduction and Production Mode Selection in a Platform Supply Chain

Store brand (SB) introduction has become a critical business strategy for many e-commerce platforms (EPs). EPs’ SB introduction decision involves both competition with the incumbent national brand (NB) manufacturer (NM) and cooperation with the SB producer. Existing research typically employs noncooperative game models to characterize the interactions among different players. In contrast, biform games integrate noncooperative and cooperative games into a unified framework to simultaneously account for competition and cooperation. As such, this paper takes a biform game approach to investigate whether an EP should introduce SB and how to select its production mode among three choices if it determines to do so: in-house production, outsourcing to NM or a third-party manufacturer (TM). Our analysis yields the following results. First, introducing SB is not always beneficial for EP. When product substitutability is lower than a threshold, EP benefits from introducing SB. Second, product substitutability and manufacturing entry cost are two important factors affecting EP’s optimal SB production mode. When they are both low, EP prefers to produce SB in house. Once the manufacturing entry cost is higher than a threshold or product substitutability is high, EP chooses to co-produce SB with TM. Cooperating with NM is EP’s optimal strategy under a higher manufacturing entry cost and intermediate product substitutability. Third, EP’s SB introduction tends to benefit NM as well, but their interests are not always aligned. This interest divergence can be mitigated by a proper side payment.