IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v27y2018i6p1124-1132.html
   My bibliography  Save this article

Should an Online Retailer Penalize Its Independent Sellers for Stockout?

Author

Listed:
  • Wenqiang Xiao
  • Yi Xu

Abstract

We consider an online retailer selling a seasonal product provided by an independent third†party seller who has superior information about the demand potential of the product. The online retailer receives customer orders and then sends the orders to the seller for fulfillment, using pre†installed capacity. The supplier privately installs capacity prior to the selling season. The online retailer faces the challenge to accomplish two goals: to incentivize the seller to install the right level of capacity and to extract full surplus from the seller. We show that the commonly used commission contracts in online retailing cannot effectively allow the online retailer to accomplish the two goals to achieve the first†best outcome. We then show that the retailer can effectively accomplish the two goals to achieve the first†best, using a lost†sale penalty contract which has three components: a fixed fee, a commission and a lost†sale penalty which will be charged to the seller if a lost sale occurs.

Suggested Citation

  • Wenqiang Xiao & Yi Xu, 2018. "Should an Online Retailer Penalize Its Independent Sellers for Stockout?," Production and Operations Management, Production and Operations Management Society, vol. 27(6), pages 1124-1132, June.
    • Handle: RePEc:bla:popmgt:v:27:y:2018:i:6:p:1124-1132
    DOI: 10.1111/poms.12859
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.12859
    Download Restriction: no
    File URL: https://libkey.io/10.1111/poms.12859?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chinonso E. Etumnu, 2022. "A competitive marketplace or an unfair competitor? An analysis of Amazon and its best sellers ranks," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(3), pages 924-937, September.
    2. Dong, Jichang & Jing, Yihan & He, Zhou & Dong, Ciwei, 2024. "How to empower commercial satellite supply chain: Insurance, government subsidy or blockchain adoption?," Omega, Elsevier, vol. 127(C).
    3. Guo Li & Hong Zheng & Mengqi Liu, 2020. "Reselling or drop shipping: Strategic analysis of E-commerce dual-channel structures," Electronic Commerce Research, Springer, vol. 20(3), pages 475-508, September.
    4. Ren, Da & Guo, Rui & Lan, Yanfei & Shang, Changjing, 2021. "Shareholding strategies for selling green products on online platforms in a two-echelon supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    5. Koussis, Nicos & Silaghi, Florina, 2023. "Revenue-sharing and volume flexibility in the supply chain," International Journal of Production Economics, Elsevier, vol. 261(C).
    6. Suyuan Luo & Tsan‐Ming Choi, 2022. "E‐commerce supply chains with considerations of cyber‐security: Should governments play a role?," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 2107-2126, May.
    7. Yugang Yu & Xue Li & Xiaoping Xu, 2022. "Reselling or marketplace mode for an online platform: the choice between cap-and-trade and carbon tax regulation," Annals of Operations Research, Springer, vol. 310(1), pages 293-329, March.
    8. Huang, Shupeng & Potter, Andrew & Eyers, Daniel & Li, Qinyun, 2021. "The influence of online review adoption on the profitability of capacitated supply chains," Omega, Elsevier, vol. 105(C).
    9. Shen, Bin & Xu, Xiaoyan & Yuan, Quan, 2020. "Selling secondhand products through an online platform with blockchain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    10. Avinadav, Tal & Chernonog, Tatyana & Khmelnitsky, Eugene, 2021. "Revenue-sharing between developers of virtual products and platform distributors," European Journal of Operational Research, Elsevier, vol. 290(3), pages 927-945.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:popmgt:v:27:y:2018:i:6:p:1124-1132. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.