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Applying a platform to expand sales

Author

Listed:
  • Wenche Wang
  • Fan Li
  • Zelong Yi

Abstract

Manufacturers often try to expand sales by making their products available on an intermediatory platform. This article examines fundamental issues related to firms’ decisions to use a platform. Due to favorable services that are provided by the platform, consumers would rather purchase from the platform than directly from the firms. In the absence of a platform, some would purchase from the firms while others would make no purchase. With a platform, on the other hand, strong-preference consumers will continue to purchase from the firms, since they are not within the platform’s target market; low-preference consumers will continue to make no purchase; only moderate-preference consumers will switch from direct purchase to platform purchase. Moreover, the firm-direct sales prices are greater than the platform sales price, so the firms take advantage of strong-preference consumers to compensate for the fee of the platform. We also show that the optimal size of the platform is related to consumers’ evaluation of the products, the platform characteristics, and consumers’ disutility of buying a non-ideal product.

Suggested Citation

  • Wenche Wang & Fan Li & Zelong Yi, 2021. "Applying a platform to expand sales," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 72(4), pages 837-852, March.
  • Handle: RePEc:taf:tjorxx:v:72:y:2021:i:4:p:837-852
    DOI: 10.1080/01605682.2019.1700193
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    Cited by:

    1. Li, Hengyu & Chen, Huangen & Chai, Junwu & Shi, Victor, 2023. "Private label sourcing for an e-tailer with agency selling and service provision," European Journal of Operational Research, Elsevier, vol. 305(1), pages 114-127.
    2. Talwar, Shalini & Dhir, Amandeep & Scuotto, Veronica & Kaur, Puneet, 2021. "Barriers and paradoxical recommendation behaviour in online to offline (O2O) services. A convergent mixed-method study," Journal of Business Research, Elsevier, vol. 131(C), pages 25-39.

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