THESIS
2021
1 online resource (ix, 69 pages) : color illustrations
Abstract
Online retailing is now an integral part of the modern economy. Platforms like Tmall
and eBay, as key players in linking sellers/suppliers with consumers, are engines of the
growth of online retail sales. This thesis investigates the incentives for and the effects of
information sharing in the online platform where multiple sellers distribute their partially
substitutable products.
The first part of the thesis discusses information sharing in the online marketplace
where the sellers make to order and incur non-linear costs. The analysis shows that the
cost structure alone determines the direction of the impact of information sharing on revenue
and cost, while the scope of information dissemination affects only the magnitude of
that impact. The online platform has incentives to voluntari...[
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Online retailing is now an integral part of the modern economy. Platforms like Tmall
and eBay, as key players in linking sellers/suppliers with consumers, are engines of the
growth of online retail sales. This thesis investigates the incentives for and the effects of
information sharing in the online platform where multiple sellers distribute their partially
substitutable products.
The first part of the thesis discusses information sharing in the online marketplace
where the sellers make to order and incur non-linear costs. The analysis shows that the
cost structure alone determines the direction of the impact of information sharing on revenue
and cost, while the scope of information dissemination affects only the magnitude of
that impact. The online platform has incentives to voluntarily share demand information
with sellers if and only if the cost structure exhibits diseconomy, linearity, or moderate
economy of scale. When the economy of scale is too large, sharing information with sellers
will reduce the total revenue and thus the platform’s earned commission. When sellers
compete in quantity, the online platform shares information with fewer sellers if their
products are more similar. The platform tends to share information with more sellers if
they compete in price, as long as the cost structure has diseconomy or moderate economy
of scale. The commission rate also impacts the platform’s optimal scope of information
sharing, depending on the cost structure. The platform’s information sharing policy
should be made based on the product category and the nature of seller competition. If the
product category has a large economy of scale, the platform should not share information
with any seller. Otherwise, the platform should share information with a subset of sellers
if they compete in quantity, or with all sellers if they compete in price.
The second part of the thesis discusses information sharing in the online marketplace
when competing sellers make to stock. The online platform has a demand forecast and
may choose to share it with the sellers in the stocking period. Differing from the usual
Cournot competition, the selling quantities put up for sale in the selling season, when
market demand realizes, are limited by, and may be smaller than, the stocking levels
built up before the selling season when market demand is unknown without information
from the platform. The analysis shows that the uninformed seller sets a higher stocking
level than the informed seller does. However, the expected selling quantities (prices) of all
sellers, informed or not, are the same and not affected by information sharing, equal to the
equilibrium quantity (price) corresponding to the certainty-equivalent case. Information
sharing benefits (hurts) the informed (uninformed) sellers by increasing (reducing) their
revenue. The online platform tends to share information with fewer sellers when stocking
is cheaper or the commission rate is lower. When the stocking cost is very low, sharing
information reduces the total revenue and thus the platform’s earned commission, then the
platform has no incentive to share information. When voluntary information sharing is not
possible, information sharing can be achieved through side payments because information
sharing reduces the costs of all the sellers, informed or not, and the cost savings always
dominate revenue loss.
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