Seller promotion and competition on decentralized two-sided platforms
Journal of Modelling in Management
ISSN: 1746-5664
Article publication date: 13 February 2024
Issue publication date: 23 May 2024
Abstract
Purpose
This paper aims to explore the promotion decisions of heterogeneous sellers on a decentralized platform under competitive conditions and analyze how seller behaviors impact platform profit, seller revenue, buyer surplus and social welfare.
Design/methodology/approach
This paper considers a Cournot model consisting of a platform charging a commission rate and two sellers with different conversion rates and browsing costs. Promotion efforts by sellers can increase traffic, but they also incur promotion costs for sellers. The sellers decide on promotion effort by weighing these two effects. The authors also explore the equilibrium when the platform charges a fixed usage fee.
Findings
The seller’s profit improves as its conversion rate increases and worsens as browsing costs increase. Also, increasing the commission rate charged by the platform makes the seller invest less in promotional efforts. Therefore, the platform must consider this trade-off to determine an optimal rate. The analysis shows that the seller with a high conversion rate and high browsing cost plays a greater role in generating more overall revenue. When the market favors such a seller, the platform tends to charge less in order not to impair its profitability.
Originality/value
This paper incorporates conversion rate, buyer’s browsing cost, unit promotion cost and the fee charged by the platform into the model to study sellers’ promotion decisions on decentralized platforms.
Keywords
Acknowledgements
Conflict of interest: The authors declare that they have no conflicts of interest.
Funding: This research is supported by “the Fundamental Research Funds for the Central Universities” (NO. WK2040000053).
Citation
Yang, F., Peng, J. and Zhang, Z. (2024), "Seller promotion and competition on decentralized two-sided platforms", Journal of Modelling in Management, Vol. 19 No. 4, pp. 1114-1135. https://doi.org/10.1108/JM2-04-2023-0072
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited