236 / 2024-04-23 17:26:59

The Interplay Between Platform Private Label Encroachment and Supplier Format Selection

private label encroachment; reselling; agency selling; game theory

Abstract: We consider a supply chain with a national brand manufacturer cooperating with a platform retailer who can introduce their high/low-end private label. We elaborate on three business formats, that is, reselling format, agency selling format, and hybrid format. By identifying the trade-off between pricing authority and private label encroachment under different formats, we characterize the equilibrium private label encroachment strategy of the retailer and the optimal business format of the supplier. In addition, intuitively, the retailer is inclined to introduce a lower-quality private label when the quality of the national brand is high. However, we find that a higher-quality private label may better benefit the retailer under certain conditions. Moreover, we establish that introducing a high-end private label can improve both channel profit and consumer welfare.  Overall, our findings not only shed light on the interact between private label encroachment and business format selection, but also provide a rational explanation for the observation that reselling format continues to prevail in the booming e-commerce era.



Keywords: private label encroachment; reselling; agency selling; game theory