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Platform Credit, Advertising, and Customer Capital

Author

Listed:
  • Efing, Matthias

    (HEC Paris)

  • Huang, Yi

    (Bank for International Settlements (BIS))

  • Han, Ruobing

    (The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen))

  • Sun, Qi

    (Shanghai University of Finance and Economics)

  • Xu, Daniel Yi

    (Duke University)

Abstract

Advertising plays a particularly crucial role in online marketplaces, where thousands of merchants offer similar products and compete for visibility and consumer attention. This study theoretically and empirically demonstrates that merchants on e-commerce platforms often engage in "underadvertising" due to financial constraints. By leveraging quasi-random variation in merchants' access to credit from a major platform lender, we establish that alleviating financial constraints leads to substantial increases in advertising expenditures, enhanced shop visibility among customers, and ultimately, accelerated sales growth. Notably, high-quality merchants with top customer ratings are especially likely to utilize platform credit to invest in advertising.

Suggested Citation

  • Efing, Matthias & Huang, Yi & Han, Ruobing & Sun, Qi & Xu, Daniel Yi, 2025. "Platform Credit, Advertising, and Customer Capital," HEC Research Papers Series 1542, HEC Paris.
    • Handle: RePEc:ebg:heccah:1542
    DOI: 10.2139/ssrn.5190309
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    More about this item

    Keywords

    platform credit; platform lending; e-commerce;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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