IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v281y2020i1p231-239.html
   My bibliography  Save this article

Strategic contracting and hybrid use of agency and wholesale contracts in e-commerce platforms

Author

Listed:
  • Zennyo, Yusuke

Abstract

This paper examines strategic contracting between a monopoly platform and suppliers that sell their goods through the platform. I consider two competing suppliers: a high-volume supplier with the larger potential demand and a low-volume supplier with the smaller one. Each supplier chooses one of two contracts: wholesale or agency. The platform has to strategically determine the royalty rate for the agency contract by taking into account which contracts the suppliers will choose. I show that the platform offers a low (high) royalty rate to induce the suppliers to adopt the agency (wholesale) contract when product substitutability is low (high) enough. More interestingly, when the degree of substitution is at an intermediate level, asymmetric contracting, in which only the low-volume supplier adopts the agency contract, can arise in equilibrium. This result is related to the fact that many long-tail and niche products with lower potential market sizes are traded on platform-based marketplaces, such as Amazon Marketplace and Walmart Marketplace.

Suggested Citation

  • Zennyo, Yusuke, 2020. "Strategic contracting and hybrid use of agency and wholesale contracts in e-commerce platforms," European Journal of Operational Research, Elsevier, vol. 281(1), pages 231-239.
    • Handle: RePEc:eee:ejores:v:281:y:2020:i:1:p:231-239
    DOI: 10.1016/j.ejor.2019.08.026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221719306964
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2019.08.026?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    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:eee:ejores:v:281:y:2020:i:1:p:231-239. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    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.