Designing an Online Retail Marketplace: Leveraging Information from Sponsored Advertising

Long, Fei; Jerath, Kinshuk; Sárváry, Miklós

doi:10.1287/mksc.2021.1307

Cited by 33 publications

(5 citation statements)

References 20 publications

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“…Many studies focus on sponsored advertising (e.g. Long et al, 2022;Yao and Mela, 2011;Ye et al, 2015;Du et al, 2017). Lian and Garrett van Ryzin (2021) have characterized the optimal balance between supply and demand as the market size grows and determined optimal subsidy policies in two-sided markets, obtaining results consistent with the race to growth observed in many two-sided markets like ride-sharing.…”

Section: Literature Reviewmentioning

confidence: 89%

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Seller promotion and competition on decentralized two-sided platforms

Yang,

Peng,

Zhang

2024

JM2

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Purpose This paper aims to explore the promotion decisions of heterogeneous sellers on a decentralized platform under competitive conditions and analyze how seller behaviors impact platform profit, seller revenue, buyer surplus and social welfare. Design/methodology/approach This paper considers a Cournot model consisting of a platform charging a commission rate and two sellers with different conversion rates and browsing costs. Promotion efforts by sellers can increase traffic, but they also incur promotion costs for sellers. The sellers decide on promotion effort by weighing these two effects. The authors also explore the equilibrium when the platform charges a fixed usage fee. Findings The seller’s profit improves as its conversion rate increases and worsens as browsing costs increase. Also, increasing the commission rate charged by the platform makes the seller invest less in promotional efforts. Therefore, the platform must consider this trade-off to determine an optimal rate. The analysis shows that the seller with a high conversion rate and high browsing cost plays a greater role in generating more overall revenue. When the market favors such a seller, the platform tends to charge less in order not to impair its profitability. Originality/value This paper incorporates conversion rate, buyer’s browsing cost, unit promotion cost and the fee charged by the platform into the model to study sellers’ promotion decisions on decentralized platforms.

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Section: Literature Reviewmentioning

confidence: 89%

“…Promotion has typically been considered a job for the platform, which charges sellers referral fees (e.g. Chen et al, 2016;Sun et al, 2020;Long et al, 2022). The platform is not only an intermediary connecting buyers and sellers but also the owner of resources, with companies such as Amazon having over 300 million user accounts in more than 180 countries [5].…”

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confidence: 99%

Seller promotion and competition on decentralized two-sided platforms

Yang,

Peng,

Zhang

2024

JM2

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“…Similar to other online platforms, e-commerce platforms attract merchants and consumers to join them for online transactions, and the platform charges merchants or consumers a commission to obtain profits [ 12 ]. The current research on e-commerce platforms mainly includes platform pricing [ 13 ], information matching and security [ 14 , 15 ], online reviews [ 16 , 17 ], logistics [ 18 ], competition [ 19 ], and other issues. Dou et al [ 13 ] held that reasonable pricing could help improve users’ utility on two sides of the platform.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Dou et al [ 13 ] held that reasonable pricing could help improve users’ utility on two sides of the platform. Long et al [ 14 ] studied the combination of private information about products held by merchants and private information of consumers held by the platform for advertising auctions to maximize market profits. Jamra et al [ 15 ] advocated that stakeholders should improve the security of e-commerce platforms to avoid property damage to consumers.…”

Section: Literature Reviewmentioning

confidence: 99%

The role of data-driven services strategy in platform competition: A system performance perspective

Xie²,

Zhang³

2023

PLoS ONE

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In the era of big data, data-driven services (DDS) have become critical competitive strategies for digital platform-based enterprises. This paper considers two operational modes of e-commerce platforms, which are self-operated and third-party modes, respectively, and they each lead a platform system. The Hotelling model is adopted to describe the competitive market of both platforms. We characterize their system performance functions. The optimization models are built using game theory to discuss the DDS and price decisions. We obtain the implementation conditions of DDS strategies for both platforms and the dominant situations of their respective DDS levels. We find that a platform adopting the price reduction strategy can improve the performance of its platform system while reducing the competitor’s system performance. From the system performance perspective, continuous improvement of the DDS level may appear “harming others may not benefit oneself”; that is, continuously improving the DDS level leads to a decrease in the competitor’s system performance but not necessarily an increase in its system performance. Further, consumer welfare within both platform systems shows the law of “as one falls then another rises”. As the big data industry matures, self-operated platforms would demonstrate the advantages of service level, profit, and system performance. In contrast, third-party platforms would have an advantage in consumer welfare. These conclusions have important implications for e-commerce platforms developing data-driven operations-based strategies.

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“…On the other hand, CPA may incentivize more bidding from low-quality sellers, because they do not need to pay any fee unless the product is sold. Long et al (2022) study a related question on setting optimal ad fees taking into account the information learned from sellers' advertising bids. In the previous literature, the platform in Sahni and Nair (2020a) uses CPC, and the platform in Moshary (2021) uses CPA.…”

Section: A Matching Approachmentioning

confidence: 99%

Quality Certificates Alleviate Consumer Aversion to Sponsored Search Advertising

Hui

2022

SSRN Journal

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Designing an Online Retail Marketplace: Leveraging Information from Sponsored Advertising

Abstract: This paper studies a marketplace design problem with asymmetric information where the platform jointly considers leveraging information revealed in ad auctions and setting sales commissions to maximize the joint profit from ad revenues and sales commissions.

Cited by 33 publications

References 20 publications

Seller promotion and competition on decentralized two-sided platforms

Seller promotion and competition on decentralized two-sided platforms

The role of data-driven services strategy in platform competition: A system performance perspective

Quality Certificates Alleviate Consumer Aversion to Sponsored Search Advertising

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