Powerful platform operators always set price limits for sellers on the platform. This paper establishes Stackelberg game models according to two pricing models when the manufacturer enters the third-party e-commerce platform and sells products online. The first is a seller-pricing model in which the manufacturer decides the online price. The second is a platform-pricing model in which the platform decides the online price. We obtain the equilibrium results for these two models and the condition that allows the manufacturer to adopt the dual-channel strategy by comparing the operation decisions and performance of supply-chain members in the two models. Results show that the dual-channel strategy of the manufacturer always decreases the profit of the traditional retailer. In comparison with the sellerpricing model, the platform-pricing model always erodes parts of the manufacturers profit obtained by the dual-channel strategy. The manufacturer will pass on the partial loss to the retailer using relative leadership in the platform-pricing model, which renders the profit of the retailer lower than that in the seller-pricing model. Also, price limits do not always bring the platform more profits; sometimes the platform is forced to set a low price.
Supported by National Natural Science Foundation of China (83118046); the Fundamental Research Funds for the Central Universities (3132018170, 3132018171); Social Science Foundation of Dalian (2017dlskyb024)
Cite this article:
Cong WANG,Huifang YANG,Deli YANG. The Influence of Third-party E-Commerce Platform Price Limits on the Dual-Channel Strategy of Manufacturers[J]. Journal of Systems Science and Information, 2019, 7(2): 173-186.
eMarketer. Worldwide Retail and Ecommerce Sales:eMarketer's Updated Forecast and New Mcommerce Estimates for 2016-2021. 2018.7.29. https://www.emarketer.com/Report/Worldwide-Retail-EcommerceSales-eMarketers-Updated-Forecast-New-Mcommerce-Estimates-20162021/2002182.
Hao W, Cai G, Jian C, et al. Online manufacturer referral to heterogeneous retailers. Production & Operations Management, 2015, 24(11):1769-1782.
E-commerce Research Center of China. Online retail market data monitoring annual report of China in 2017. 2018.6.3.
Business.sohu.com. Ivestment rules of Tmall. 2006.11.11. http://business.sohu.com/20161103/n472203314.shtml.
Arbatskaya M. Can low-price guarantees deter entry?. International Journal of Industrial Organization, 2001, 19(9):1387-1406.
Wismer S. Intermediated vs. direct sales and a no-discrimination rule. Social Science Electronic Publishing, 2013.
Chiang W Y K, Hess J D. Direct marketing, indirect profits:A strategic analysis of dual-channel supply-chain design. Management Science, 2003, 49(1):1-20.
Lu Q, Liu N. Effects of e-commerce channel entry in a two-echelon supply chain:A comparative analysis of single-and dual-channel distribution systems. International Journal of Production Economics, 2015, 165:100-111.
Hsiao L, Chen Y. Strategic motive for introducing internet channels in a supply chain. Production & Operations Management, 2014, 23(1):36-47.
Mukhopadhyay S K, Zhu X, Yue X. Optimal contract design for mixed channels under information asymmetry. Production & Operations Management, 2008, 17(6):641-650.
Xiong Y, Wei Y, Xiong Z K, et al. "Bricks vs. Clicks":The impact of manufacturer encroachment with a dealer leasing and selling of durable goods. European Journal of Operational Research, 2012, 217(1):75-83.
He Y, Huang H, Li D. Inventory and pricing decisions for a dual-channel supply chain with deteriorating products. Operational Research, 2018:1-43.
Cattani K, Gilland W, Heese H S, et al. Boiling frogs:Pricing strategies for a manufacturer adding a direct channel that competes with the traditional channel. Production and Operations Management, 2006, 15(1):40-56.
Dan B, Xu G, Liu C. Pricing policies in a dual-channel supply chain with retail services. International Journal of Production Economics, 2012, 139(1):312-320.
Tsay A A, Agrawal N. Channel conflict and coordination in the E-commerce age. Production & Operations Management, 2010, 13(1):93-110.
Liu M, Cao E, Salifou C K. Pricing strategies of a dual-channel supply chain with risk aversion. Transportation Research Part E, 2016, 90:108-120.
Xu H, Liu Z Z, Zhang S H. A strategic analysis of dual-channel supply chain design with price and delivery lead time considerations. International Journal of Production Economics, 2012, 139(2):654-663.
Li L, He J, Shi Q. Dual-channel pricing strategies for small and medium-sized enterprises. International Journal of Services Technology & Management, 2014, 20(1/2/3):47-70.
Bu S, Yu F R. A game-theoretical scheme in the smart grid with demand-side management:Towards a smart cyber-physical power infrastructure. IEEE Transactions on Emerging Topics in Computing, 2013, 1(1):22-32.
Örsdemir A, Kemahlioglu-Ziya E, Parlaktuerk A K. Competitive quality choice and remanufacturing. Production and Operations Management, 2014, 23(1):48-64.