×

Promoting end-of-season product through online channel in an uncertain market. (English) Zbl 1490.90015

Summary: Firms typically introduce online promotional channels based on the cooperative format of agency selling or reselling to promote end-of-season products. The selection of the agency selling or reselling format is greatly affected by a firm’s pricing timing between traditional and online promotional channels, particularly in an uncertain market. Within this context, we examine how the pricing timings in an online promotional channel relative to a traditional channel impact a firm’s selection between agency selling and reselling formats in an uncertain market. We find that the promotional pricing timings have no effect on the firm’s price decisions under the agency selling format, whereas they might lead to downward prices under the reselling format – even lower than those under the agency selling format. We show that considering promotional pricing timing in an uncertain market fundamentally changes the general intuition that the firm prefers the agency selling to reselling format due to the double-marginalization effect. Specifically, the reselling format might be more profitable for the firm when it sets traditional-channel promotional price prior to introducing the online promotional channel in an optimistic market (i.e., a market more likely to have high demand) or adopts the opposite promotional pricing timing of channels in a pessimistic market (i.e., a market more likely to have low demand). Our findings complement the emerging online retail literature by underscoring the interacting forces of promotional pricing timing and uncertain demand on a firm’s reselling versus agency selling format choice in promoting end-of-season product online.

MSC:

90B05 Inventory, storage, reservoirs
90B06 Transportation, logistics and supply chain management
91A80 Applications of game theory
91B24 Microeconomic theory (price theory and economic markets)
PDFBibTeX XMLCite
Full Text: DOI

References:

[1] Abhishek, V.; Jerath, K.; Zhang, Z. J., Agency selling or reselling? Channel structures in electronic retailing, Management Science, 62, 8, 2259-2280 (2015)
[2] Amir, R.; Stepanova, A., Second-mover advantage and price leadership in bertrand duopoly, Games and Economic Behavior, 55, 1, 1-20 (2006) · Zbl 1138.91304
[3] Anand, K. S.; Goyal, M., Strategic information management under leakage in a supply chain, Management Science, 55, 3, 438-452 (2009) · Zbl 1232.90107
[4] Beetsma, R.; Uhlig, H., An analysis of the stability and growth pact, The Economic Journal, 109, 458, 546-571 (1999)
[5] Bell, D. R.; Iyer, G.; Padmanabhan, V., Price competition under stockpiling and flexible consumption, Journal of Marketing Research, 39, 3, 292-303 (2002)
[6] Breiter, A.; Huchzermeier, A., Promotion planning and supply chain contracting in a high-low pricing environment, Production and Operations Management, 24, 2, 219-236 (2015)
[7] Cachon, G. P.; Swinney, R., Purchasing, pricing, and quick response in the presence of strategic consumers, Management Science, 55, 3, 497-511 (2009) · Zbl 1232.91418
[8] Chen, P.; Yan, Y.; Xu, G.; Zhao, R., Promotion decisions under asymmetric demand-generation information: Self-operated, online-platform and offline-outlet strategies, IEEE Transactions on Fuzzy Systems, 27, 5, 928-942 (2018)
[9] Article 102085 article.
[10] Chiang, W. Y.K.; Chhajed, D.; Hess, J. D., Direct marketing, indirect profits: A strategic analysis of dual-channel supply-chain design, Management Science, 49, 1, 1-20 (2003) · Zbl 1232.90231
[11] Van Dammea, E.; Hurkens, S., Endogenous price leadership, Games and Economics Behaviour, 47, 404 (2004) · Zbl 1077.91013
[12] Desai, P. S., Quality segmentation in spatial markets: When does cannibalization affect product line design?, Marketing Science, 20, 3, 265-283 (2001)
[13] Du, P.; Xu, L.; Chen, Q.; Tsai, S. B., Pricing competition on innovative product between innovator and entrant imitator facing strategic customers, International Journal of Production Research, 56, 5, 1806-1824 (2016)
[14] Elmaghraby, W.; Keskinocak, P., Dynamic pricing in the presence of inventory considerations: Research overview, current practices, and future directions, Management Science,, 49, 10, 1287-1309 (2003) · Zbl 1232.90042
[15] Feng, Y.; Gallego, G., Optimal starting times for end-of-season sales and optimal stopping times for promotional fares, Management Science, 41, 8, 1371-1391 (1995) · Zbl 0859.90024
[16] Geng, X.; Tan, Y.; Wei, L., How add-on pricing interacts with distribution contracts, Production and Operations Management, 27, 4, 605-623 (2018)
[17] Guo, X.; Zheng, S.; Yu, Y.; Zhang, F., Optimal bundling strategy for a retail platform under agency selling, Production and Operations Management (2020)
[18] Hagiu, A., Merchant or two-sided platform, Review of Network Economics, 6, 2, 115-133 (2007)
[19] Hagiu, A.; Lee, R. S., Exclusivity and control, Journal of Economics and Management Strategy, 20, 3, 679-708 (2011)
[20] Hagiu, A.; Wright, J., Do you really want to be an ebay, Harvard Business Review, 91, 3, 102-108 (2013)
[21] Hagiu, A.; Wright, J., Marketplace or reseller?, Management Science, 61, 1, 184-203 (2015)
[22] Hagiu, A.; Wright, J., Controlling vs. enabling, Management Science,, 65, 2, 577-595 (2019)
[23] Hamilton, J. H.; Slutsky, S. M., Endogenous timing in duopoly games: Stackelberg or Cournot equilibria, Games and Economic Behavior, 2, 1, 29-46 (1990) · Zbl 0753.90074
[24] Hao, L.; Fan, M., An analysis of pricing models in the electronic book market, MIS Quarterly, 38, 4, 1017-1032 (2014)
[25] Jiang, B.; Jerath, K.; Srinivasan, K., Firm strategies in the “mid tail” of platform-based retailing, Marketing Science, 30, 5, 757-775 (2011)
[26] Kong, G.; Rajagopalan, S.; Zhang, H., Revenue sharing and information leakage in a supply chain, Management Science, 59, 3, 556-572 (2013)
[27] Kwark, Y.; Chen, J.; Raghunathan, S., Platform or wholesale? A strategic tool for online retailers to benefit from third-party information, MIS Quarterly, 41, 3, 761-785 (2017)
[28] Lazear, E. P., Retail pricing and clearance sales, American Economic Review, 76, 1, 14-32 (1986)
[29] McLevin, Y.; Gill, J.; Nediak, M., Price guarantees in dynamic pricing and revenue management, Operations Research, 55, 1, 75-97 (2007) · Zbl 1167.90340
[30] Li, J.; Granados, N.; Netessine, S., Are consumers strategic? structural estimation from the air-travel industry, Management Science, 60, 9, 2114-2137 (2014)
[31] Li, P.; Tan, D.; Wang, G.; Wei, H.; Wu, J., Retailer’s vertical integration strategies under different business modes, European Journal of Operational Research (2020)
[32] Li, Y.; Liu, Y., A risk-averse multi-item inventory problem with uncertain demand, Journal of Data, Information and Management, 1, 3, 77-90 (2019)
[33] Liang, J., Optimal pricing and offline to online channel strategies under money-back guarantees, Journal of Systems Engineering, 34, 2, 226-237 (2019) · Zbl 1438.90157
[34] Lin, Y. T.; Parlaktrk, A. K.; Swaminathan, J. M., Are strategic customers bad for a supply chain?, Manufacturing & Service Operations Management, 20, 3, 481-497 (2018)
[35] Luo, L.; Sun, J., New product design under channel acceptance: Brick-and-mortar, online-exclusive, or brick-and-click, Production and Operations Management, 25, 12, 2014-2034 (2016)
[36] Mantin, B.; Krishnan, H.; Dhar, T., The strategic role of third-party marketplaces in retailing, Production and Operations Management, 23, 11, 1937-1949 (2014)
[37] Matsui, K., When should a manufacturer set its direct price and wholesale price in dual-channel supply chains?, European Journal of Operational Research, 258, 2, 501-511 (2017) · Zbl 1394.90109
[38] Niu, B.; Wang, Y.; Guo, P., Equilibrium pricing sequence in a co-opetitive supply chain with the ODM as a downstream rival of its OEM, Omega-The International Journal of Management Science, 57, 249-270 (2015)
[39] Pashigian, B. P.; Bowen, B., Why are products sold on sale? explanations of pricing regularities, The Quarterly Journal of Economics,, 106, 4, 1015-1038 (1991)
[40] Pashigian, B. P.; Bowen, B.; Gould, E., Fashion, styling, and the within-season decline in automobile prices, The Journal of Law and Economics,, 38, 2, 281-309 (1995)
[41] Qin, X.; Liu, Z.; Tian, L., The optimal combination between selling mode and logistics service strategy in an e-commerce market, European Journal of Operational Research, 289, 2, 639-651 (2020) · Zbl 1487.90160
[42] Rhee, K. E.; Thomadsen, R., Behavior-based pricing in vertically differentiated industries, Management Science,, 63, 8, 2729-2740 (2016)
[43] Ryan, J. K.; Sun, D.; Zhao, X., Competition and coordination in online marketplaces, Production and Operations Management, 21, 6, 997-1014 (2012)
[44] Sauma, E. E.; Oren, S. S., Proactive planning and valuation of transmission investments in restructured electricity markets, Journal of Regulatory Economics, 30, 3, 358-387 (2006)
[45] Shen, Y.; Willems, S. P.; Dai, Y., Channel selection and contracting in the presence of a retail platform, Production and Operations Management, 28, 5, 1173-1185 (2019)
[46] Su, X., Intertemporal pricing with strategic customer behavior., Management Science, 53, 5, 726-741 (2007) · Zbl 1232.91435
[47] Su, X.; Zhang, F., Strategic customer behavior, commitment, and supply chain performance, Management Science, 54, 10, 1759-1773 (2008) · Zbl 1232.91262
[48] Tan, Y.; Carrillo, J. E.; Cheng, H. K., The agency model for digital goods, Decision Sciences, 47, 4, 628-660 (2016)
[49] Tan, Y. R.; Carrillo, J. E., Strategic analysis of the agency model for digital goods, Production and Operations Management,, 26, 4, 724-741 (2017)
[50] Tian, L.; Vakharia, A. J.; Tan, Y.; Xu, Y., Marketplace, reseller, or hybrid: Strategic analysis of an emerging e-commerce model., Production and Operations Management, 27, 8, 1595-1610 (2018)
[51] Van, V.; Damme, E.; Hurkens, S., Endogenous stackelberg leadership, Games and Economic Behavior, 28, 1, 105-129 (1999) · Zbl 0938.91011
[52] Wei, J.; Lu, J.; Zhao, J., Interactions of competing manufacturers’ leader-follower relationship and sales format on online platforms, European Journal of Operational Research, 280, 2, 508-522 (2020) · Zbl 1430.90149
[53] Wiehenbrauk, D., Collaborative promotions: Optimizing retail supply chains with upstream information sharing (2010), Springer Verlag: Springer Verlag Heidelberg, Germany
[54] Xu, S., Zhang, J., & Ding, Z. (2017). A report about online retailing: New business opportunities imported from tail goods market. Retrieved from http://www.767stock.com/2017/09/18/27663.html(accessed August 6,(2020).
[55] Yan, Y.; Zhao, R.; Liu, Z., Strategic introduction of the marketplace channel under spillovers from online to offline sales, European Journal of Operational Research,, 267, 1, 65-77 (2018) · Zbl 1403.90186
[56] Yan, Y.; Zhao, R.; Xing, T., Strategic introduction of the marketplace channel under dual upstream disadvantages in sales efficiency and demand information, European Journal of Operational Research, 273, 3, 968-982 (2019)
[57] Zennyo, Y. (2019). Strategic contracting and supplier encroachment through an e-commerce platform. Available at SSRN: https://ssrn.com/abstract=3488243.
[58] Zennyo, Y., Strategic contracting and hybrid use of agency and wholesale contracts in e-commerce platforms., European Journal of Operational Research, 281, 1, 231-239 (2020) · Zbl 1430.90155
[59] Zhang, D. J.; Dai, H.; Dong, L.; Qi, F.; Zhang, N.; Liu, X.; Yang, J., The long-term and spillover effects of price promotions on retailing platforms: Evidence from a large randomized experiment on alibaba, Management Science, 66, 6, 2589-2609 (2020)
[60] Zhang, L.; Wang, J., Coordination of the physical and the online channels for a short-life-cycle product, European Journal of Operational Research, 258, 2, 639-651 (2017) · Zbl 1394.90069
[61] Zhang, S.; Zhang, J., Agency selling or reselling: E-tailer information sharing with supplier offline entry, European Journal of Operational Research, 280, 1, 134-151 (2020) · Zbl 1430.90158
[62] Zhao, W.; Zheng, Y. S., Optimal dynamic pricing for perishable assets with nonhomogeneous demand, Management Science, 46, 3, 375-388 (2000) · Zbl 1231.91106
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.