Differentiated premium membership mechanism in platform competition

Abstract

The rapid rise of premium memberships on e-commerce platforms has made it a core strategy for platform competition, attracting widespread attention from the industry and academia. This paper studies two kinds of differentiated membership mechanisms, i.e. the General Pattern (GP) available to all consumers and the Top-tier Pattern (TP) offered only to high-value consumers. We have a detailed description of the consumer's consumption behaviour in line with the real platform competition scenario. We first conducted a separate analysis of the two membership mechanisms and found that the actual implementation effect of TP and GP membership mechanisms are equivalent when there is no membership competition. Then we focussed on the scenario of differentiated member competition. We discuss the interaction between the two membership mechanisms and do a sensitivity analysis of the optimal decisions. The impact of the membership mechanism competition on the member group segmentation and consumption transfer is depicted well and analysed. At last, we use numerical examples to show the relationship between platform profits and some important exogenous variables under differentiated membership competition, and we also find that the differentiated membership mechanisms competition can let the two platforms achieve a win-win result.