International Manufacturer’s Online Marketplace Choice Considering Behavior-Based Pricing

Abstract

Considering the fact that the phenomenon of consumer behavior-based pricing (BBP) is becoming more prominent in global online sales, an international online channel decision-making model composed of an e-commerce firm and a manufacturer is established. The e-commerce firm is the leader, while the manufacturer is the follower. This study analyzes the decision-making problems in two cases. The first case happens when an international manufacturer establishes its own online-selling website. The second case uses the e-commerce firm’s online-selling platform. We make a horizontal and vertical comparison of equilibrium decision-making for these two participants, respectively. We examine how the manufacturer makes choices and how the e-commerce firm makes decisions about the referral fee rate and franchise fee under the BBP in the international environment. Whether the two players make different decisions between new customers and regular customers is verified. By constructing mathematical models under different channel structures and solving them, and finally, by comparing the equilibrium decisions under different structures and numerical analysis with the help of mathematical software, we have obtained some interesting conclusions. It is found that if the manufacturer establishes its own online-selling website, the e-commerce firm will provide new customers with lower prices than the price for regular customers. At this point, as direct competition forms between the e-commerce platform and the manufacturer, this allows the platform to offer lower prices to new customers in order to attract more new customers to shop on the platform. The manufacturer would differentiate new customers and regular customers according to the unit selling cost of its own website and consumers’ shopping costs. If the manufacturer uses the online-selling platform of the e-commerce firm, the manufacturer will provide a lower price to new customers; however, the e-commerce firm’s attitude to new and regular customers is affected by the referral fee rate. In addition, when the referral fee rate is reduced and the franchise fee is moderated, or the referral fee rate is moderate, and the franchise fee is reduced, the e-commerce firm will decide to attract manufacturers to sell products on its online platform. The manufacturer will give up establishing its own online-selling website and prefer to sell on the e-commerce firm’s online platform.