Delivery Arrangement in Online Distribution Channels Under Different Power Structures
Express delivery is widely recognized as one of the most critical and expensive operations for e-commerce. When selling products online, the e-retailer may ask the supplier to be responsible for delivering products to customers, and the supplier responds by accepting or rejecting such a delivery proposal. Motivated by these observations, we explore the delivery arrangement in an online distribution channel with two competing suppliers selling substitutable products through a common e-retailer. Based on the nonlinear delivery cost that reflects either delivery economy or diseconomy, we analytically characterize the equilibrium delivery arrangement in the E-retailer-Stackelberg and Supplier-Stackelberg games. We show that the market follower might be more willing to undertake the delivery than the market leader in each Stackelberg game. Counterintuitively, the e-retailer prefers to undertake the delivery when there is a large delivery diseconomy under each power structure but prefers asking both suppliers to deliver products when there is a delivery economy (a small delivery diseconomy) in the E-retailer-Stackelberg (Supplier-Stackelberg) game. The suppliers agree to undertake the delivery only when the delivery economy is large in the E-retailer-Stackelberg game, whereas, in the Supplier-Stackelberg game, they agree to do so even though there is a significant delivery diseconomy. Interestingly, even if both suppliers might be better off rejecting to undertake the delivery when competition becomes fierce under each power structure, they still agree to do it and fall into the prisoner’s dilemma. The hybrid delivery arrangement cannot be an equilibrium outcome in the E-retailer-Stackelberg game, but it might emerge in equilibrium in the Supplier-Stackelberg game. While the e-retailer’s delivering products can generate the highest consumer surplus and social welfare, it benefits the e-retailer only; in contrast, shifting the delivery responsibility to the suppliers might benefit channel members and generate the highest consumer surplus and social welfare simultaneously
Year of publication: |
[2023]
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Authors: | Zhou, Xiongwei ; Zhu, Chaoqun ; Cai, Dan |
Publisher: |
[S.l.] : SSRN |
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