Product quantity and supplier format choice under platform information sharing

Under uncertain demand, this paper examines a situation where a supplier distributes products on a retail platform through reselling or agency selling in the presence of pricing and quantity decisions. Under reselling, the platform can observe the actual demand and set retail prices contingent on demand realization; under agency selling, the supplier can only price responsively if the platform shares demand information, otherwise the supplier needs to make retail prices based on random demand. However, product quantity should be pre-determined regardless of the selling format and information policy. Interestingly, we find that the product quantity may be higher under reselling than under agency selling, and that information sharing does not necessarily increase the quantity in the case of agency selling. We then characterize the commission rate threshold below which the supplier chooses agency selling. Findings suggest that the threshold decreases with demand uncertainty when information is not shared. However, information sharing would cause a non-monotonic interaction between demand uncertainty and format choice. When demand uncertainty is relatively low or high, responsive pricing capability enhances the supplier’s preference for agency selling as demand uncertainty increases; otherwise, the supplier is decreasingly motivated to choose agency selling by increased demand uncertainty. Also notably, a high demand uncertainty might elicit the platform to withhold information. This study extends the existing literature by incorporating the quantity decision and responsive pricing capability. The findings provide insights to assist firms in deciding product quantity and offer valuable guidelines for suppliers’ selling format choice and platforms’ information-sharing strategy.