548 / 2024-04-25 20:59:07

Platform Encroachment with Financing Strategy Under Demand Uncertainty

Supply chain finance,Game theory,Platform financing,Newsvendor competition,Platform encroachment

Platforms have encroached on the market in recent decades by establishing self-run channels in addition to agent-selling channels and providing financing services to suppliers to ensure product supply. Exogenous shocks like pandemics and trade frictions, however, induce inventory risk and increase financial risk for suppliers. This study investigates the interaction between a platform's channel structures and financing strategies in a co-opetitive supply chain, capturing the impacts of demand uncertainty and financing risk. We consider four scenarios: no encroachment under bank financing (NB) or platform financing (NP) and encroachment under bank financing (EB) or platform financing (EP). We find that platform encroachment does not improve the total market supply, even though competition exists. Interestingly, the platform tends to disregard the supplier's sales via the agent-selling channel, but the supplier adjusts its sales in response to the platform's sales in the self-run channel to regulate overall market supply. As the commission rate rises, the platform first prefers Scenario EP and then prefers Scenario NP, whereas the supplier first prefers Scenario NB (or NP) and then prefers Scenario EB (or EP). This result leads to a counterintuitive situation in which both participants cannot reach a consensus due to the competition effect and inventory risk transfer effect. Finally, by endogenizing the commission rate, we find that there is a U-shaped relationship in terms of complementarity and substitutability between the commission and interest rates as the unit production cost increases, resulting in a win-win situation.