The competition between B2C platform and third-party seller considering sales effort

Abstract

Purpose By studying the competition between a B2C platform and a third-party seller, the purpose of this paper is to analyze and compare their optimal decisions and profits between cases with and without sales effort of the platform or third-party seller. Design/methodology/approach This paper studies the competition between a B2C platform and a third-party seller. The platform sells a product directly, and allows the third-party seller to sell a competing product on the platform. Based on whether the platform or the third-party seller makes sales effort, there are four scenarios. The paper analyzes the optimal decisions and profits of platform and third-party seller under each scenario, respectively. Findings The transaction fee has a negative effect on third-party seller’s sales effort level. What is more, the platform can take a free riding from the third-party seller’s sales effort, but the platform’s sales effort has a negative effect on the profit of third-party seller. Practical implications These results provide managerial insights for the platform and the third-party seller to make decisions. Originality/value This paper is among the first papers to study the competition between B2C platform and third-party seller.