Information transparency and business mode selection in online platforms under manufacturer competition

Abstract

In this study, we investigate the interaction between an online platform’s information sharing strategy and its business mode choice in a supply chain with two competing manufacturers both selling through a common online platform under demand uncertainty. The online platform possesses private demand information and arranges with each manufacturer either a reselling mode (R) or an agency mode (A). We find that the online platform prefers not to share information in the RR mode, but prefers to do so with manufacturers that adopt the agency mode in the AA and AR/RA modes. Interestingly, in the AA mode, the online platform prefers to share information with only one manufacturer, rather than both, depending on the level of upstream competition. Counter-intuitively, although both manufacturers always benefit from information sharing, they do not always prefer to possess an information advantage over their competitor, especially when the competitors adopt the reselling mode. Furthermore, we find that the impact of information sharing on business mode choice depends on the level of upstream competition, commission rate and the information value. The transparency generated by the platform’s information sharing will enhance the probability of the AA and AR modes being adopted. Our findings can provide important managerial implications for the differentiated information sharing strategies of online platforms such Amazon and Tmall.