Government investment strategy and platform pricing decisions with the cross-market network externality

Abstract

Purpose Considering the cross-market network externality, this paper aims to explore the platform’s pricing decisions and its optimal profit under the given government investment, and then investigate the investment decision to improve social responsibility, which is measured by the social welfare. Design/methodology/approach When exploring the optimal pricing decisions under the given government investment, extreme value theory and sensitive analysis are used. When investigating the investment level, game theory and optimization method are used. Numerical examples are conducted to further illustrate the results. Findings First, after considering the government investment, whether the buyers and the sellers are charged depends on the investment level and the difference of the cross-market network externality (CNC) of the sellers and the buyers. Second, the optimal price on the sellers is decreasing (increasing) in the CNC of the buyers (sellers). The optimal price on the buyers is significantly affected by the investment level. Finally, the government investment is win-win for both the platform and the government, and Chinese Government should invest on the sellers heavily. Originality/value This study specifies the role of the government investment on the sellers in determining the platform’s pricing decisions and the improvement of the social responsibility, which is measured by social welfare.

Guest editorial

“…The optimal price on the buyers is significantly affected by the government investment level. Finally, the investment provides positive effects for both platforms; thus, they (Xu et al , 2021) recommend an active government investment policy.…”

“…The empirical implications for the organisation environment are examined. Cottafava and Corazza (2021) propose a tool to identify and assess active stakeholders of an organisation, Liu et al (2021) elaborate on the effects of institutional support on green innovation performance, and (Xu et al , 2021) the price formation supporting the viability of all stakeholders in the supply chain. Zhang et al (2021) provide relations between pure profit, environmental impact and social welfare in a socially responsible supply chain.…”

“…2.6 Government investment strategy and platform pricing decisions with the cross-market network externality. Xu et al (2021) explore the organisation pricing decisions and its optimal profit under the given government investment, and then investigate the investment decision to improve social responsibility, which is measured by social welfare.…”

Supply Chain Coordination of Product and Service Bundling Based on Network Externalities

“…Network externalities have a significant impact on the pricing, market demand and total channel performance of bundled distribution channels [36,37]. There are studies on network externalities in various fields, such as electric vehicles [38], wireless devices [39], the gaming market [40] and government investment [41].…”

Altruistic Preference Models of Low-Carbon E-Commerce Supply Chain

“…The development of LCSC can help reduce the total carbon emission and excessive resource consumption, as well as environmental pollution [21]. At present, research on LCSC mainly focuses on three aspects: government regulations [22,23], government subsidies for emission reduction [24][25][26], and consumers' low-carbon preference [27,28]. The government regulations include three categories: carbon restrictions [29][30][31], carbon taxes [32][33][34][35], and carbon trading plans [36][37][38].…”