eprintid: 10182765
rev_number: 22
eprint_status: archive
userid: 699
dir: disk0/10/18/27/65
datestamp: 2023-12-04 11:29:33
lastmod: 2025-03-03 13:36:03
status_changed: 2023-12-04 11:29:33
type: article
metadata_visibility: show
sword_depositor: 699
creators_name: Tang, Christopher S
creators_name: Deng, Yiting
creators_name: Wang, Wei
creators_name: Yoo, Onesun Steve
title: Can an E-commerce platform and its third party sellers benefit from each other's market entry?
ispublished: pub
divisions: UCL
divisions: B04
divisions: C05
divisions: F49
note: This version is the author accepted manuscript. For information on re-use, please refer to the publisher's terms and conditions.
abstract: E-commerce platforms have an informational advantage over their third-party sellers, leading to the common belief that a platform's market entry would harm sellers with similar products. However, unlike traditional retail competition, the platform and its sellers have aligned incentives: the platform's commission depends on the seller's revenue, and sellers rely on the platform to strengthen their online presence.  Hence, the platform has no incentive to enter the market to harm the seller's revenue severely.  This paper introduces a duopoly model where the seller is the "incumbent" and the platform is the "potential entrant".  Our model captures two salient features: (a) the "reputation effect" that enables the platform to obtain a higher consumer valuation than the seller, and (b) the "spillover effect" that expands the market size when an additional entity (e.g., the platform) enters the market.  Our equilibrium analysis debunks the prevailing belief about platform's entry, showing that platform's entry can enable both the platform and the seller to obtain a higher profit when the unit cost is sufficiently low and the spillover effect is sufficiently high. For robustness checks, we consider three different extensions: an alternative duopoly model with reversed roles where the platform is the incumbent and the seller is the potential entrant, a scenario with an endogenously determined spillover effect, and a simultaneous market entry/exit decision-making process. We find a consistent result across all three extensions that both seller and platform entries can mutually benefit under similar market conditions, fostering a symbiotic relationship.
date: 2024-01
date_type: published
publisher: Production and Operations Management Society
official_url: https://doi.org/10.1177/10591478231224913
oa_status: green
full_text_type: other
language: eng
primo: open
primo_central: open_green
verified: verified_manual
elements_id: 2113834
doi: 10.1177/10591478231224913
lyricists_name: Yoo, Onesun Steve
lyricists_id: OYOOX79
actors_name: Yoo, Onesun Steve
actors_id: OYOOX79
actors_role: owner
full_text_status: public
publication: Production and Operations Management
volume: 33
number: 1
pagerange: 69-86
citation:        Tang, Christopher S;    Deng, Yiting;    Wang, Wei;    Yoo, Onesun Steve;      (2024)    Can an E-commerce platform and its third party sellers benefit from each other's market entry?                   Production and Operations Management , 33  (1)   pp. 69-86.    10.1177/10591478231224913 <https://doi.org/10.1177/10591478231224913>.       Green open access   
 
document_url: https://discovery.ucl.ac.uk/id/eprint/10182765/1/paper_FINAL.pdf