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Platform Credit, Advertising, and Customer Capital

Author

Listed:
  • Matthias Efing

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Yi Huang
  • Ruobing Han
  • Qi Sun
  • Daniel Yi Xu

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

  • Matthias Efing & Yi Huang & Ruobing Han & Qi Sun & Daniel Yi Xu, 2025. "Platform Credit, Advertising, and Customer Capital," Working Papers hal-05107660, HAL.
    • Handle: RePEc:hal:wpaper:hal-05107660
    DOI: 10.2139/ssrn.5190309
    as

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