Pricing and capacity allocation strategies: Implications for manufacturers with product sharing

Abstract

Emerging sharing modes, like the consumer‐to‐consumer (C2C) sharing of Uber and the business‐to‐consumer (B2C) sharing of GoFun, have considerably affected the retailing markets of traditional manufacturers, who are motivated to consider product sharing when making pricing and capacity decisions, particularly electric car manufacturers with limited capacity. In this paper, we examine the equilibrium pricing for a capacity‐constrained manufacturer under various sharing modes and further analyze the impact of capacity constraint on the manufacturer's sharing mode selection as well as equilibrium outcomes. We find that manufacturers with low‐cost products prefer B2C sharing while those with high‐cost products prefer C2C sharing except when the sharing price is moderate. However, limited capacity motivates manufacturers to enter into the B2C sharing under a relatively low sharing price, and raise the total usage level by sharing high‐cost products. We also show that the equilibrium capacity allocated to the sharing market with low‐cost products first increases and then decreases. Finally, we find that sharing low‐cost products with a high limited capacity leads to a lower retail price under B2C sharing, which creates a win‐win situation for both the manufacturer and consumers. However, sharing high‐cost products with a low limited capacity creates a win‐lose situation for them.

Impact of capacity on the supplier's distribution channel selection in facing a retail platform

“…Liu and van Ryzin (2008) examines the profitability of deliberately creating a shortage of capacity which motivates consumers to purchase products earlier. Dai and Nu (2020) examine manufacturers' capacity allocation and pricing strategy in online product‐sharing marketplaces. Federgruen et al (2018) consider a two‐echelon distribution system in the setting of random demand and storage constraints.…”

Research on sales and sharing decisions of the equipment supplier under shared manufacturing environment

“…Another stream of research focuses on sales and sharing strategies of the equipment supplier, which is divided into two aspects in terms of equipment usage: the living and office equipment and the manufacturing equipment. Most scholars focus on sales and sharing strategies of suppliers of living and office equipment (Desai and Purohit, 1998;Yu et al, 2018;Dai and Nu, 2020;Wang et al, 2020;Tian et al, 2021;Mao et al, 2021;Guo et al, 2022a, b) Guo et al (2022a, b) further consider the impact of platform commission rates and offline operating costs and study whether the supplier shares capacity directly offline or through the third-party platform. Xiao and Cao (2023) consider the impact of users' perceived value and usage demand, investigate whether the supplier joins the third-party platform to share capacity and analyze whether the supplier builds its own platform to share capacity in the absence of the third-party platform.…”

“…Most scholars focus on sales and sharing strategies of suppliers of living and office equipment (Desai and Purohit, 1998; Yu et al. , 2018; Dai and Nu, 2020; Wang et al. , 2020; Tian et al.…”

Toward supply side incentive: The impact of government schemes on a vehicle manufacturer's adoption of electric vehicles

“…The investigation of GM's battery supply program reveals that the scarcity of key battery metals such as lithium, cobalt, and nickel, and the large price spikes of these metals make battery supply even harder (Dai and Nu, 2020). For example, the price of cobalt is quadrupled (Turcheniuk et al., 2018).…”