The Interaction Between Information Disclosure Strategy and Channel Structure in Platform Retailing: The Role of Product Returns

Abstract

ABSTRACTDifferent information disclosure formats have been implemented to solve the severe product-return issue in platform retail. Considering the significant impact of channel structure choice on the information disclosure strategy, we explore their interaction by investigating the role of product returns. A multistage sequential game model is built in a supply chain comprising a platform and supplier. First, we derive the equilibrium pricing decisions in the short term and examine the role of product returns. Second, we study the optimal information disclosure strategy and channel structure choice in the long term. We also investigate the impact of the optimal strategy on the entire supply chain’s profits and consumer surplus. The following results were obtained: (1) Under the no information disclosure strategy, the presence of product returns weakens the impact of double marginalization in the wholesale model. Therefore, the information disclosure strategy improves product returns, but aggravates the double marginalization effect. (2) Information disclosure benefits the consumer and supply-chain members who disclose information, but may hurt the entire supply chain due to its negative spillover effect on other supply-chain members. (3) The optimal channel structure choice for the platform depends on the trade-off between these two effects of the information disclosure strategy on product returns. Therefore, platforms and suppliers should reexamine their attitudes toward product returns and be aware that more information is not always better, because of the impact of product returns.KEY WORDS AND PHRASES: Platform retailinginformation disclosurewholesale modelagency modelproduct returnsonline platformsonline returnschannel structure AcknowledgmentsWe appreciate the editors and the three anonymous reviewers for their constructive and thorough comments, which help us to improve our study.Data availability statementTableDownload CSVDisplay TableDisclosure statementNo potential conflict of interest was reported by the author(s).Notes1. See https://www.digitalcommerce360.com/article/us-ecommerce-sales, accessed on June 29, 2023.2. See https://www.statista.com/statistics/266282/annual-net-revenue-of-amazoncom, accessed on June 29, 2023.Additional informationFundingThis research is supported by the National Natural Science Foundation of China [grant no. 72101041]; China Postdoctoral Science Foundation [grant no. 2022M722896]; National Office for Philosophy and Social Science of China [grant no. 21CGL003]; and Scientific and Technological Research Program of Chongqing Municipal Education Commission [grant no. KJQN202100606].Notes on contributorsMengli LiMengli Li (limengli@zzu.edu.cn) is a lecturer in the School of Management at Zhengzhou University, China. She received her Ph.D. degree in management from Chongqing University. Dr. Li’s research interests include platform retailing, supply-chain management, and the applications of the game theory.Li WanLi Wan (wanli@cqupt.edu.cn; corresponding author) is an associate professor of supply-chain management at the School of Modern Posts, Chongqing University of Posts and Telecommunications, China. She received her Ph.D. in industrial and information engineering from the University of Udine, Italy. Dr. Wan’s research interests include supply-chain management, reshoring, and internationalization of emerging countries’ multinational companies.