Game Analysis On Business Model Selection And Pricing Decision Between Platform And Third-party Sellers

In recent years,e-commerce platforms represented by Amazon,Alibaba and JD have achieved great success,and many modern enterprises have successively transformed into the platform mode.Platform competition has gradually become one of the main forms of competition among current’s internet enterprises.With the increasing power of platform,more and more platforms use a hybrid business model,not only provide services for third party sellers,and act as a connection on both sides of the users of the market,but also serves as a traditional “merchant” role,directly enter the market by creating own brands or reselling goods,competing with sellers on the platform for the same consumer market.The increasingly fierce platform competition and the widespread application of hybrid business model have attracted the continuous attention of many enterprise managers and scholars at home and abroad.However,the existing research mainly focuses on the pricing of monopoly model,and the selection of business model under platform competition and the mechanism of competition and cooperation within the platform have not been explored.Therefore,based on the shortage of existing research and the necessity of expanding research,this study tried to explore the optimal business model selection and two-sided pricing strategy of the platform under duopoly.Considering that the influence of the existing hybrid business model on the decision-making of the platform supply chain members is still unclear,this study further explores the competition and cooperation relationship between the internal members of a platform using the hybrid business model,and studies the optimal market entry and logistics sharing strategy between the platform and the third-party sellers.For the problem of optimal business model selection and two-sided pricing decision under platform competition,this study established a duopoly competition model considering the cross-sided network effect and user multi-homing behavior based on Hotelling model.By solving the duopoly equilibrium,we explored the strategic interaction between the platform’s entry decisions under two scenarios: scenario S(both sellers and buyers are single-homing)and scenario M(the buyers are single-homing,whereas the sellers are partial multi-homing).Our findings indicated that scenario M allows the platform to adjust the proportion of different types of sellers more flexibly compared with the constant market share of all sellers under scenario S.Moreover,more sellers tend to multi-home as the cross-sided network effect increases,the market expansion effect increases,and the buyer transfer rate decreases.Platforms can gain more profits by making an early-entry into the market unless the cost of entry is high.For platforms that make a late entrance into the market,the entry decision is jointly complicated by the cross-sided network effect,the market expansion effect,the buyer transfer rate and the costs and benefits of entry.More importantly,the prisoner’s dilemma may arise when both platforms make the entry decision.The results show that the hybrid business model in most cases can bring higher profits to the platform,but its internal mechanism has not yet been proven,and the logistics cooperation between the platform and third-party further complicated their relationship.Therefore,this study constructed a Stackelberg game model considering different market-entry sequence and logistics-sharing strategies of platforms and third-party sellers.The optimal solution of the model is solved and numerical simulation is conducted to explore how the choice of market entry order interacts with logistics sharing strategy,which affects the pricing decisions and revenues of platform owners and third-party sellers.The results reveal that the platform owner can benefit from logistics sharing in most situations,and entry sequence choice can be used as a negotiation method to motivate third-party(3P)sellers to use platform’s logistics service and achieve a win-win situation by mediating the commission rate and platform’s logistics service level.When the logistics sharing option is excluded,both the platform and 3P sellers want to enter the market later if they cannot provide significantly better logistics services than their competitors.In contrast,when sharing logistics services,the platform and 3P sellers hope to enter the market earlier,and the profit gap caused by the entry sequence increases.Additionally,we find that the platform owner can strategically adjust the unit logistics service price to avoid strong competition in certain dimensions.The contributions of this study are as follows: theoretically,(1)this study proposed a game model based on Hotelling model to explore the interaction between platform business model and user multi-homing behavior while considering the cross-sided network effect,andcontributes to the development of existing theoretical research on platform competition,two-sided pricing and partial multi-homing with a new angle of view.(2)In the context of platform competition,this study innovatively considered the realistic scenario where the platform owner enters the market and directly competes with third-party sellers.This dual competition background is a necessary supplement to the existing platform economy research and enriches the two-sided market theory.(3)The interaction between market-entry sequence and logistics-sharing strategy between platform owners and third-party sellers is studied,which clarified the internal mechanism of platform ecological operation,and expands the integration theory of the existing platform hybrid business model,market-entry sequence,and competition and cooperation relationship.In practice,(1)this study explored the combined effects of platform business model and user multi-belonging behavior on platform pricing,number of users and member profit(utility),which is helpful for platform supply chain members to formulate scientific operation strategies.(2)this study investigate the interaction of market-entry sequence and logistics-sharing strategy between a platform with hybrid business mode and a third-party seller.Thus,this study shed light on the pricing,service investment and other decisions for platform supply chain members,and provide effective theoretical guidance to the platform business model selection.(3)In addition,the disciplinarian of competition and cooperation between platform and third-party sellers provides important management implications for value creation and sustainable development of platform supply chain.