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The Influence of Third-party E-Commerce Platform Price Limits on the Dual-Channel Strategy of Manufacturers

  • Cong Wang EMAIL logo , Huifang Yang and Deli Yang
Published/Copyright: May 31, 2019
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Abstract

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 seller-pricing 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)


Acknowledgements

The authors gratefully acknowledge the editor and anonymous referees for their insightful comments and helpful suggestions that led to a marked improvement of the article.

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Received: 2018-09-18
Accepted: 2018-12-13
Published Online: 2019-05-31

© 2019 Walter De Gruyter GmbH, Berlin/Boston

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