Subsidy strategy of pharmaceutical e-commerce platform based on two-sided market theory.

Chenshuo Li,Zhe Huang,Yongli Li

doi:10.1371/journal.pone.0224369

Abstract

With the development of economic globalization and information technology, enterprises pay more attention to the sustainable development of their e-commerce. Under this trend, we study the subsidy strategy commonly used by pharmaceutical e-commerce platforms in two-sided market. Based on the two-sided market theory, we set up the two-sided user's utility function and formulate the subsidy strategy as the decision of platform profit optimization. We show that the platform chooses to subsidize consumers only if the net income from consumer is lower than the total revenue of drug retailers and platforms in each transaction; the maximum profit for platform increases with the intensity of the network externality. This study provides theoretical support and decision-making suggestions for the pharmaceutical e-commerce platforms to capture the market share, obtain higher profits and ultimately achieve the sustainable development goal.

Highlights

With the development of network economy, two-sided market plays an increasingly significant role in the social economy, and the research on the two-sided market has been paid more and more attention by scholars
Subsidy strategy of pharmaceutical e-commerce platform based on two-sided market theory low awareness of online pharmacies, and these factors have affected the sustainable development of pharmaceutical e-commerce
The main purpose of our work is to study what kind of subsidy strategy is used by the pharmaceutical e-commerce platform to maximize the profit of the platform, and to explore the influence of the intensity of network externality on the platform subsidy strategy

Summary

Introduction

With the development of network economy, two-sided market plays an increasingly significant role in the social economy, and the research on the two-sided market has been paid more and more attention by scholars. Subsidy strategy of pharmaceutical e-commerce platform based on two-sided market theory low awareness of online pharmacies, and these factors have affected the sustainable development of pharmaceutical e-commerce. In the fierce market competition, the pharmaceutical e-commerce platform seizes the market share monopolized by traditional pharmacies by means of ‘subsidy war’ and‘price war’, in order to obtain higher profits, adjust the platform supply and demand balance, and promote the sustainable development of the industry In this case, different subsidy strategies selected by the platform will produce different subsidy effects. Based on the two-sided market theory, we build a game-theoretic model with network externality, and conduct an empirical study on the subsidy strategies of two-side users of pharmaceutical e-commerce platform.

Literature review

Conclusions