538 / 2024-04-25 20:05:29

Ad Slot Allocation Strategy of a Retail Platform Under the Hybrid Selling Mode

retail platform,advertising,hybrid selling mode,self-preferencing,game theory

  Retail platforms such as Amazon and JD.com possess a wealth of advertising ad-slot resources, playing a crucial role in stimulating demand and driving product sales. Given the competitive nature of third-party sellers’ products against the platforms’ own products, the allocation of these ad-slots between the two becomes a pivotal concern for retail platforms. This paper presents a game-theoretical model focusing on how a retail platform decides to allocate two types of ad-slots—a superior slot with high exposure and an inferior slot with lower exposure—between its own product and that of a third-party seller’s. We identify three equilibrium allocation strategies influenced by factors such as commission rate, product value, and ad-slot exposure level. Furthermore, we analyze the effects of these allocation strategies and market factors on prices and profits. Our findings contribute to the literature on platform operations and advertising management, offering valuable insights for firms making decisions about ad-slot allocation and product pricing within the hybrid selling mode of retail platforms.