Supplier Encroachment, Information Sharing, and Channel Structure in Online Retail Platforms

Abstract

In this study, we develop a game‐theoretic model to study the encroachment and information sharing decisions in a supply chain with a manufacturer selling through an online retail platform. In the base model, the manufacturer decides whether to encroach or not by selling through an agency channel, in addition to an existing reselling channel, at the same platform, who decides whether or not to share information with the manufacturer. We fully characterize the equilibrium decisions and show how they depend on the commission rate of the agency channel, channel substitutability, and information accuracy. Our analysis unfolds a novel wholesale price effect that extends related results in the literature. We also show that encroachment and information sharing are complementary, and therefore managers should not ignore the impact of one decision on the other decision even when the latter is not a primary motivation of the former. We study several model extensions to obtain additional insights and show that the major findings of the base model are robust and remain mostly valid when some modeling assumptions are changed.