Abstract

Online intermediary plays an important role in e-commerce nowadays. Traditionally, it serves as a merchant buying goods from manufacturers and reselling them to consumer. With the development of technology, more and more intermediaries choose to become platforms referring consumers to sellers. It is critical for an intermediary to decide which model to adopt. To address this question, we establish a game-theoretic model with an intermediary and multiple manufacturers competing in selling heterogeneous products. Our analysis indicates that as the heterogeneity among products decreases, either at the production or the consumer side, the intermediary prefers the platform model to the merchant model. Nevertheless, if the products are highly similar, and thus the competition at the retail market is highly intense, the merchant model will be a better choice.

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