660 / 2024-04-30 17:55:07

Contract Selection under Platform Asymmetry

competitive platform, network externality, revenue-sharing contract, wholesale contract

Traditionally, B2C platforms purchase the vehicle source through a wholesale contract. This heavy asset mode brings a considerable supply cost to the platform. Recently, some of these platforms have also started to serve as the users of vehicles instead of the owner by signing the revenue-sharing contract. This new format will mitigate the double-marginalization effect and benefit the platform and supplier through a revenue-sharing scheme. However, when there is more than one monopoly platform on the market, downstream competition between two asymmetric platforms moderates this possibility. We also find that commission fee and network external intensity affect the composition of Nash equilibrium. More specifically, when the commission fee is small, and the service quality of the two platforms is highly differentiated (i.e., the degree of platform asymmetry is high), a unique asymmetric Nash Equilibrium exists. When the commission fee is small, and the two platforms are close (i.e., low platform asymmetry), revenue-sharing contracts are preferred by both subjects. Finally, when the commission fee is significant, regardless of the two platforms’ quality difference, the revenue-sharing contract makes both platforms better off, and a unique symmetric Nash Equilibrium will always be constituted. There are no Nash Equilibrium candidates for cases where both platforms adopt wholesale contracts, although this situation is the most common. Our findings complement the emerging platform competition literature and provide testable empirical suggestions concerning differen factors steering the contract selection.