Strategy Analysis of Selling Model Selection in Vertical Competition Supply Chains: A Game Theoretic Model

Abstract

This paper takes the supply chain perspective to study the choice of selling model for manufacturers and e-tailers. To accomplish our objective, we consider three selling models, including reselling, agency selling, and mixed selling. By comparing and analyzing the equilibrium outcomes of the three selling models, we obtain some beneficial results. These results show that manufacturers and e-tailers cannot manage to make a profit at the same time whether they choose the reselling model or agency selling model. Our results also show that the mixed selling model may improve supply chain performance, as long as the cross-price elasticity is not low. Especially when the cross-price elasticity is comparatively high, a manufacturer and an e-tailer in vertical competition can achieve a profit-Pareto-improving situation, regardless of the market share of the e-tailer.

Effectiveness of self‐run vs. third‐party sales channels on the consumers' purchase intention: A multi‐method exploration of the moderating role of review volume

“…Researchers have also considered various other aspects of sales mode selection. For example, the literature includes analyses of the effects of strategy (Ha et al, 2022; Zhen & Xu, 2022; Zhong et al, 2022; Zhong & Shen, 2022), new technology (Liu, Ma, Hu, & Zhang, 2021; Wu & Yu, 2022), costs (Shi et al, 2021; Zhong & Shen, 2022), information exchange (Ha et al, 2021; Tsunoda & Zennyo, 2021; Zhang & Zhang, 2020), platform fees and prices (Q. Chen, Liu, et al, 2021; Shi et al, 2021; Wei et al, 2021; Zhen & Xu, 2022), product promotion tactics (P. Chen, Zhao, et al, 2021), competition intensity at the retail level (Jerath & Zhang, 2010), types of online review information (Kwark et al, 2017), and information accuracy (Hagiu & Wright, 2015) on sales mode choice. Moreover, instead of adopting a pure reselling or agency selling strategy, many e‐tailers are rapidly transitioning to adopting both sales modes simultaneously (Fu et al, 2021; Yan et al, 2018).…”