Coopetition between B2C E-commerce Companies: Price Competition and Logistics Service Cooperation

Abstract

This paper studies the impact of logistics cooperation in two competing companies, one of which is equipped with a self-run logistics system while the other is not. The latter outsources logistics services to a third-party logistics company before logistics cooperation, or to its competitor after logistics cooperation with the client’s service quality being in proportion to and no greater than the service provider’s service quality. We find that when the service provider is a price taker, logistics cooperation is beneficial to both firms only when the service quality after logistics cooperation is moderate. Interestingly, under some circumstances, the client’s profit increases even when its service quality decreases after logistics cooperation because logistics cooperation eases the price competition. We also find that all-win situations in which logistics cooperation increases the firms’ profit, consumer surplus and social welfare can be achieved. Finally, when the service price can be chosen by the service provider, we propose a negotiation process in which agreement on logistics cooperation can be reached; when the firm can invest in service quality, logistics cooperation may lower the equilibrium investment level.