Can Third-Party Sellers Benefit from a Platform’s Entry to the Market?

Deng, Yiting; Tang, Christopher S.; Wang, Wei; Yoo, Onesun Steve

doi:10.2139/ssrn.4254034

Cited by 3 publications

(18 citation statements)

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“…By examining the data provided by JD.com, Deng et al (2023) find that, upon JD.com's entry, the sales prices and the sales quantities of those sellers who sell similar products tend to increase on average. We find this empirical result to be surprising and yet it gives a plausible reason to justify why many sellers continue to co-exist after the platform's entry.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Currently, empirical findings are mixed: Zhu and Liu (2018) find that third-party sellers in the United States tend to decrease the number of products they offer on a platform when it enters the market; however, Dryden et al (2020) find an opposite result using data collected in France and Germany. More recently, Deng et al (2023) analyze data provided by JD.com and find that third-party sellers tend to adjust their price higher and even sell more after the platform's entry. Crawford et al (2022) find Amazon's entry into Germany's Marketplace's Home & Kitchen department to be more aligned with market expansion than business stealing.…”

Section: Introductionmentioning

confidence: 99%

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Can an E-commerce Platform and its Third-Party Sellers Benefit From Each Other’s Market Entry?

Tang,

Deng,

Wang

et al. 2024

Production and Operations Management

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E-commerce platforms have an informational advantage over their third-party sellers, leading to the common belief that a platform's market entry would harm sellers with similar products. However, unlike traditional retail competition, the platform and its sellers have aligned incentives: the platform's commission depends on the seller's revenue, and sellers rely on the platform to strengthen their online presence. Hence, the platform has no incentive to enter the market to harm the seller's revenue severely. This paper introduces a duopoly model where the seller is the "incumbent" and the platform is the "potential entrant". Our model captures two salient features: (a) the "reputation effect" that enables the platform to obtain a higher consumer valuation than the seller, and (b) the "spillover effect" that expands the market size when an additional entity (e.g., the platform) enters the market. Our equilibrium analysis debunks the prevailing belief about platform's entry, showing that platform's entry can enable both the platform and the seller to obtain a higher profit when the unit cost is sufficiently low and the spillover effect is sufficiently high. For robustness checks, we consider three different extensions: an alternative duopoly model with reversed roles where the platform is the incumbent and the seller is the potential entrant, a scenario with an endogenously determined spillover effect, and a simultaneous market entry/exit decision-making process. We find a consistent result across all three extensions that both seller and platform entries can mutually benefit under similar market conditions, fostering a symbiotic relationship.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Can an E-commerce Platform and its Third-Party Sellers Benefit From Each Other’s Market Entry?

Tang,

Deng,

Wang

et al. 2024

Production and Operations Management

Self Cite

View full text Add to dashboard Cite

show abstract

“…One subject is whether platform owners or manufacturers should enter the market and what impact their entry has (e.g. He et al, 2020;Tian et al, 2021; IMDS 124,1 Deng et al, 2023). Specifically, He et al (2020) empirically analyze whether the owner of an online marketplace should enter the market and investigate the impact of a platform owner's entry on the demand of third-party stores.…”

Section: Literature On the Market Entry Strategymentioning

confidence: 99%

“…Tian et al (2021) uncover conditions under which the manufacturer should enter the market and reveal the impact of the manufacturer's entry on the number of products, consumer surplus and social welfare in the sharing market. Deng et al (2023) combine empirical and analytical methods and reveal that the platform's entry is not always harmful to third-party sellers and identify conditions of a win-win situation for both parties after the platform's entry. The second subject is how different factors affect the platform's entry strategy (e.g.…”

Section: Literature On the Market Entry Strategymentioning

confidence: 99%

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Optimal employment model for an entrant platform in on-demand service market

Zhang,

Feng,

Feng

et al. 2023

IMDS

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PurposeFor an entrant platform in the on-demand service market, choosing an appropriate employment model is critical. This study explores how the entrant optimally chooses the employment model to achieve better performance and investigates the optimal pricing strategies and wage schemes for both incumbent and entrant platforms.Design/methodology/approachBased on the Hotelling model, the authors develop a game-theoretic framework to study the incumbent's and entrant's optimal service prices and wage schemes. Moreover, the authors determine the entrant's optimal employment model by comparing the entrant's optimal profits under different market configurations and analytically analyze the impacts of some critical factors on the platforms' decision-making.FindingsThis study reveals that the impacts of the unit misfit cost of suppliers or consumers on the pricing strategies and wage schemes vary with different operational efficiencies of platforms. Only when both the service efficiency of contractors and the basic employee benefits are low, entrants should adopt the employee model. Moreover, a lower unit misfit cost of suppliers or consumers makes entrants more likely to choose the contractor model. However, the service efficiency of contractors has nonmonotonic effects on the entrant's decision.Originality/valueThis study focuses on an entrant's decision on the optimal employment model in an on-demand service market, considering the competition between entrants and incumbents on both the supplier and consumer sides, which has not been investigated in the prior literature.

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Competing platform owners’ entry and an OEM's cooperation response

Wu,

Zha,

Liang

2024

Int Trans Operational Res

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This paper develops a game‐theoretic model that examines the entry decisions of two competing platform owners with differentiated research and development (R&D) efficiency and the response strategy of an original equipment manufacturer (OEM) in selecting which platform to cooperate with. The OEM and platform owners compete on quality and price in the face of consumers with heterogeneous preferences across the dimensions of the device and platform. We analyze the interaction between the entry decisions of platform owners and the OEM's response strategy within two cooperation models. In the charging model, we find that in the absence of entry, the OEM prefers the high‐efficiency platform. When only one platform owner enters, the OEM prefers the low‐efficiency platform. If the differentiated R&D efficiency and the device differentiation cost are large, both platform owners will choose to enter and the OEM will cooperate with the low‐efficiency platform. In the bundling model, when only one platform owner enters, only at a large cost of device differentiation will the OEM cooperate with the platform that enters the market to weaken market competition. In particular, when only the high‐efficiency platform enters, it is interesting that there exists a large cost of device differentiation that makes the high‐efficiency platform more favorable in the case when the OEM cooperates with the low‐efficiency platform. Our study provides practical insights into platform entry and OEM response.

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Can Third-Party Sellers Benefit from a Platform’s Entry to the Market?

Cited by 3 publications

References 0 publications

Can an E-commerce Platform and its Third-Party Sellers Benefit From Each Other’s Market Entry?

Can an E-commerce Platform and its Third-Party Sellers Benefit From Each Other’s Market Entry?

Optimal employment model for an entrant platform in on-demand service market

Competing platform owners’ entry and an OEM's cooperation response

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