Information Sharing in an Online Marketplace with Co-opetitive Sellers

Abstract

In recent years, the rapid development of online marketplaces has not only given rise to co-opetitive relationships between sellers but also to information asymmetry between online marketplaces and sellers. This paper studies information sharing in an e-commerce setting consisting of an online marketplace, an upstream manufacturer and a reseller, where the online marketplace possesses superior demand information while the manufacturer and reseller engage in a co-opetitive structure. The reseller procures the products from the manufacturer under a wholesale price contract, and both the manufacturer and the reseller sell the products through the online marketplace by paying a proportional commission fee. We examine the online marketplace's four information-sharing strategies: no information sharing (S1), full information sharing (S2), and partial information sharing with the manufacturer (S3) or with the reseller (S4). Our analysis shows that when the intensity of competition between the manufacturer and reseller is relatively low and the demand variability is moderate, the online marketplace should adopt full information sharing; otherwise, it will prefer to share its demand information with the manufacturer only. Moreover, interestingly, we find that the manufacturer always prefers the scenario of full information sharing to the scenario that endows it with an informational advantage against the reseller. By contrast, the reseller never prefers full information sharing. Depending on the competitive intensity and demand variability, the reseller will either prefer the scenario in which the online marketplace shares the demand information with it only or the scenario in which demand information is shared with the manufacturer only. The rationale for these results hinges on the interactions of the signaling cost, the efficiency effect, and the co-opetitive relationship between the manufacturer and the reseller.