How Should E-Commerce Platforms Subsidize Retailers with Logistics Constraints during an Epidemic Scenario? Considering Power Structure and Altruistic Preference

Abstract

To maintain the sustainable development of a platform’s economy, e-commerce platforms put forward various subsidy programs to retailers selling on them during COVID-19. This paper investigates an e-commerce platform’s decision on subsidizing a retailer selling on it with logistics constraints during an epidemic scenario, with a focus on the role of power structure and altruistic preference. By constructing two Stackelberg game models, the research obtains the optimal subsidy under two power structures (i.e., the dominant platform and the weaker platform), respectively. The comparison between them shows that the conditions of the dominant platform giving subsidies (both altruistic preference and logistics constraints should be higher enough) are stricter than the weaker platform. Considering the same altruistic preference and logistics constraints, the optimal subsidy provided by the weaker platform should always be not less than the dominant platform. However, the weaker platform, surprisingly, can get more utility by lowering its altruistic preference voluntarily when the commission fee is low. No matter what the power structure is, the optimal subsidy increases with the logistics service coefficient and altruistic preference, and the dominant member’s profit/utility is not less than the weaker one, which confirms “the first mover advantage”. Finally, more managerial implications to the platform-retailer systems are discussed.

Efficiency of Digital Economy in the Context of Sustainable Development: DEA-Tobit Approach

“…For instance, Yang et al (2021) argue that e-commerce could help achieve sustainable development in rural areas. Zhang and Xu (2021) support the view that e-commerce could help maintain sustainable development by putting forward various subsidy programmes for retailers. Moreover, e-commerce is critical for the country's market position and its developmental perspectives (Jasińska-Biliczak, 2022).…”

The impact of COVID‐19 on logistics and coping strategies: A literature review

“…Abudureheman and Nilupaer (2021) analyze and study the current situation of e‐commerce logistics at home and abroad, and to optimize and satisfy the needs of the modern e‐commerce business, create a cross‐border e‐commerce logistics distribution model. In an effort to maintain sustainable platform economies, Zhang and Xu (2021) examine one e‐commerce platform’s decision to subsidize retailers that sold through it during the pandemic despite logistical constraints, focusing on the role of power structures and altruistic preferences.…”

“…In an effort to maintain sustainable platform economies, Zhang and Xu (2021) examine one e-commerce platform's decision to subsidize retailers that sold through it during the pandemic despite logistical constraints, focusing on the role of power structures and altruistic preferences.…”

Sustainable strategies for green supply chain within the platform economy consider subsidies and marketing efforts

“…When consumers show higher green awareness, manufacturers face lower commission rate and higher profit margins [ 21 ]. Zhang et al [ 37 ] constructing two Stackelberg game models suggest that weaker platforms can gain more utility by voluntarily reducing their altruistic preferences when commission rate is low. In addition, Zhang et al [ 38 ] show the dominance of any retailer over the manufacturer under the contract.…”