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Manufacturer's contract choice facing competing downstream online retail platforms

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  • Bingbing Liu
  • Xiaolong Guo
  • Yugang Yu
  • Lin Tian

Abstract

Reseller contract and online marketplace contract are two typical supply chain contracts provided by Online retail platforms (ORPs) in online retailing. Manufacturers can either wholesale their products to an ORP using the traditional reseller contract or choose an agency selling contract to sell their products directly to consumers through an online marketplace provided by the ORP. Based on a game model, this paper studies the contract choice strategy for a monopoly manufacturer facing two competing downstream ORPs. The results show that the competition intensity between the ORPs and the order-fulfilment costs critically moderates the choice decision. Specifically, for a given competition intensity (level of order-fulfilment costs), with rising order-fulfilment costs (the downstream competition intensity), the preferred mode for the manufacturer switches from the pure online marketplace mode to the hybrid mode and then to the pure reseller mode. The intuition of this lies in the interaction of the transfer of the pricing rights and the responsibility for order fulfilment. Meanwhile, the conditions to ensure the dominant equilibrium in the competition of ORPs are analysed. Finally, we extend the basic model by relaxing the assumptions about the same proportion fee rate and the fixed order-fulfilment cost.

Suggested Citation

  • Bingbing Liu & Xiaolong Guo & Yugang Yu & Lin Tian, 2021. "Manufacturer's contract choice facing competing downstream online retail platforms," International Journal of Production Research, Taylor & Francis Journals, vol. 59(10), pages 3017-3041, May.
    • Handle: RePEc:taf:tprsxx:v:59:y:2021:i:10:p:3017-3041
    DOI: 10.1080/00207543.2020.1744767
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    Cited by:

    1. Yu Tian & Bin Dan & Ting Lei & Molin Liu, 2023. "Supplier encroachment and information transparency on fresh produce e‐commerce platform: Impacts on the traditional channel," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 733-752, March.
    2. Wang, Tong-Yuan & Chen, Zhen-Song & He, Peng & Govindan, Kannan & Skibniewski, Miroslaw J., 2023. "Alliance strategy in an online retailing supply chain: Motivation, choice, and equilibrium," Omega, Elsevier, vol. 115(C).
    3. Zhang, Tao & Tang, Zhongjun, 2023. "Should manufacturers open live streaming shopping channels?," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    4. 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.
    5. Huang, Song & Chen, Yuqing, 2023. "Manufacturer encroachment with competing dual-purpose online retail platforms," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
    6. Xu, Xiaoping & Hong, Zhaofu & Chen, Yujing & Cheng, T.C.E., 2023. "When is it wise to use artificial intelligence for platform operations considering consumer returns?," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1188-1205.
    7. Cheng, Fei & Chen, Tong & Shen, Yuting & Jing, Xiaodong, 2022. "Impact of green technology improvement and store brand introduction on the sales mode selection," International Journal of Production Economics, Elsevier, vol. 253(C).
    8. Jiang, Zhong-Zhong & He, Na & Huang, Song, 2021. "Government penalty provision and contracting with asymmetric quality information in a bioenergy supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).
    9. Li, Dan & Liu, Yongmei & Hu, Junhua & Chen, Xiaohong, 2021. "Private-brand introduction and investment effect on online platform-based supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    10. Liu, Bingbing & Yu, Yugang & Guo, Xiaolong, 2021. "Simpler and better: Supply chain contracting in the presence of contract unobservability and upstream competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).

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