Investment strategies of information‐provision technology in the platform‐based supply chain

Abstract

AbstractOn retailing platforms, several information‐provision technologies are adopted to gain profit, such as production video ads service, live streaming service, and virtual reality/augmented reality tech. In this article, we focus on the investment strategies of information‐provision tech and its impact on the platform‐based supply chain. To this end, we develop a general model under which the platform invests in information‐provision tech for homogenous sellers and consumers search for products on the platform. Our results show that the platform should adopt a higher investment level in information‐provision tech for the products with the unit search cost or products' information uncertainty degree being medium. Also, a more competitive environment can lead to a lower platform's investment level in information‐provision tech when the number of browsing products is sufficiently large. Interestingly, we find that for a large unit search cost or small uncertainty degree of products' information, investing in information‐provision tech can benefit the platform's and sellers' profit. In addition, if the number of browsing products is large, investing in information‐provision tech can increase the consumer surplus and social welfare. Lastly, our results hold for a broad class of distributions of products' information uncertainty value and other practical cases. Our studies can help the platform to understand the roles of information‐provision tech and provide some practical management insights.