Previous research suggested that both demand stimulation and extrusion effects appeared at an e-commerce platform due to the intense competition for sellers. On the one hand, market competition implies more market opportunities. On the other hand, it also attracts more customers (such as through low price and promoting) and creates network effect obviously on the demand side, which stimulates more products to enter the platform. The seemingly contradictory views were rarely observed and examined from time series analysis in previous studies. In this paper, both the long-term and short-term effects of product competition on the abundance of product supply were tested by using 140,000 outbound tour packaged products from Ctrip.com. FGLS was used to test the econometric model. The result shows that product competition will have a positive stimulating effect on the abundance of product supply in a short-term time window (about one month), but then there is a mixed effect of positive stimulus and negative extrusion, and finally, the effect gradually disappears. This paper provides an important policy implication for the e-commerce platforms to improve governance of product competition and effectively manage complementors and product categories.
Liu, Qi and Zhu, Zhen, "The Long-term and Short-term Effects of Product Competition on Supply Abundance in an E-commerce Platform" (2020). WHICEB 2020 Proceedings. 14.