Retailer's selling mode choice under different competition forms

Abstract

AbstractWe examine the online retailer's selling mode choice under different competition forms in an online retailing supply chain. Four models based on two selling modes (i.e., agency selling and direct selling) and two competition forms (i.e., Bertrand and Cournot) are constructed, and the conditions for the online retailer to choose the optimal selling mode are identified. The results show that the online retailer's optimal choice of selling mode is mainly affected by the direct selling cost under Bertrand competition, whereas it is affected jointly by the direct selling cost, competition intensity, and commission rate under Cournot competition. Additionally, in the direct selling mode, both the online retailer and platform can obtain more profits under Cournot competition; however, in the agency selling mode, the online retailer can benefit from Bertrand competition when the commission rate is moderate, and Cournot competition otherwise. Finally, the effects of competition intensity, commission rate, and direct selling cost on the profits of the online retailer and platform are investigated by numerical analysis.