For many products, platforms enable sellers to transact with buyers. We show that the competitive conditions among sellers shape the market structure in platform industries. If product market ...competition is tough, sellers avoid competitors by joining different platforms. This allows platforms to sustain high fees and explains why, for example, in some online markets, several homogeneous platforms segment the market. Instead, if product market competition is soft, agglomeration on a single platform emerges, and platforms fight for the dominant position. These insights give rise to novel predictions. For instance, market concentration and fees are negatively correlated in platform industries, which inverts the standard logic of competition.
Abstract
We present a new class of methods for identification and inference in dynamic models with serially correlated unobservables, which typically imply that state variables are econometrically ...endogenous. In the context of Industrial Organization, these state variables often reflect econometrically endogenous market structure. We propose the use of Generalized Instrument Variables methods to identify those dynamic policy functions that are consistent with instrumental variable (IV) restrictions. Extending popular “two-step” methods, these policy functions then identify a set of structural parameters that are consistent with the dynamic model, the IV restrictions and the data. We provide computed illustrations to both single-agent and oligopoly examples. We also present a simple empirical analysis that, among other things, supports the counterfactual study of an environmental policy entailing an increase in sunk costs.
While implementing Industry 4.0, organizational environments become more global, dynamic, and competitive thereby intensifying contradictory demands. In light of the resource and knowledge ...intensiveness of this often multi-year process, this study draws on paradox theory to identify the main organizational tensions emerging and persisting during the Industry 4.0 transformation of companies in a two-step approach. First, a systematic review of 73 academic papers on organizational challenges in Industry 4.0 adoption is conducted that summarizes 35 key challenges. Second, from these challenges a conceptual framework is built that illustrates the main tensions in Industry 4.0 implementation. The identified organizational tensions are categorized according to the learning, organizing, belonging, and performing categories proposed by the paradox theory. Moreover, resolution strategies to address these tensions have been drawn from the reviewed literature. These strategies are presented and linked to the individual tensions. Finally, tensions and resolution strategies were preliminary validated by a group of Industry 4.0 professionals during a workshop. As a result, the findings provide 23 tensions and 18 related resolution strategies illustrating how organizations can address to competing demands simultaneously when implementing Industry 4.0 technologies and thus raise their competitiveness and performance. Based on these results, the article discusses implications for operations management practitioners that can use the proposed framework to inform their strategies and decisions in Industry 4.0 implementation. Moreover, policymakers can adopt the results to develop focussed support actions for driving the Industry 4.0 transition. Finally, four main avenues for future research and implications for operations management scholars are provided.
•We develop a model to analyze a supplier selling its products to loyal consumers and general shoppers under the different online retailer platform modes.•We characterize the supplier’s optimal ...selling format selection under the minimum quantity contract in different market structure settings.•We find when one mode is offered by the platform, the supplier should choose the marketplace mode with a low minimum quantity contract.•We discuss the managerial implications for the supplier and platform in selecting the selling format and setting the minimum quantity contract, respectively.
With the rapid development of e-commence, online shopping festivals have become increasingly important as sales drivers of online retail platforms in recent years. In online shopping festivals, selection of the selling format is a key strategy for the suppliers. In this paper, we develop a model to analyze a supplier selling its products to loyal consumers and general shoppers through an online retailer platform who offers either the marketplace or reselling mode or both modes. We characterize the supplier’s optimal selling format selection under the minimum quantity contract in different market structure settings. We find that when the platform offers at most one mode, the supplier should select the marketplace mode under a low minimum quantity contract to avoid the double marginalization effect of the reselling mode. If the minimum quantity contract in the marketplace mode is relatively high, the supplier should select the reselling mode under a low minimum quantity contract. When the platform offers both modes, the supplier’s optimal selling format selection depends on the market structure. When the potential market of the loyal consumers is sufficiently small, even if the platform allows the supplier to use both modes, the supplier tends to choose only one platform mode to avoid channel competition. The more loyal consumers there are, the more willing the supplier will use both modes for larger potential market. Finally, we discuss the managerial implications for the supplier and platform in selecting the selling format and setting the minimum quantity contract, respectively.
•Examine the impact of brand loyalty on exclusive and nonexclusive trade-in programs.•Compare the two trade-in programs in retaining consumers.•An exclusive trade-in program is always the dominant ...strategy for both firms.•A nonexclusive trade-in program is better for both firms when brand loyalty is sufficiently high.•Improve trade-in practices with the consideration of brand loyalty and market competition.
Trade-in promotions are increasingly recognized as an effective strategy in retail operations to boost sales. Retail firms can restrict their trade-in programs to current consumers through an exclusive trade-in program or accept trade-ins from competitors’ consumers through a nonexclusive trade-in program. Moreover, consumers may build brand loyalty towards the products they have used and thus affect their future trade-in choices. However, the effects of brand loyalty on trade-in strategies in a competitive market remain underexplored. To bridge this gap, this study analytically examines the impact of brand loyalty on exclusive and nonexclusive trade-in programs by developing a stylized duopoly model. The results show that as a defensive strategy, an exclusive trade-in program effectively retains consumers when brand loyalty is sufficiently weak. Conversely, as an offensive strategy, a nonexclusive trade-in program is more likely to attract competitors’ consumers. An exclusive trade-in program is always the dominant strategy for both firms compared with the no trade-in benchmark. However, a nonexclusive trade-in program is better for both firms when brand loyalty is sufficiently strong. Moreover, an exclusive trade-in program benefits firms with a high proportion of trade-in-sensitive consumers. In contrast, firms with a high proportion of the overall consumer base benefit from a nonexclusive trade-in program. The results not only support trade-in practices but also provide important practical implications related to trade-in competition for policymakers.
•Game-theoretical model that captures technology licensing and parallel importation.•Study the impacts of parallel importation on players’ profits and the licensing fee.•The licensor may reduce the ...licensing fee when parallel importation occurs.•Technology licensing may occur though the licensor is worse off due to gray markets.•The licensee's profit may be adversely affected by parallel importation.
Parallel importation, also referred to as the “gray market”, is the unauthorised import of genuine-branded products into a country without the permission of the intellectual property owner. We develop a game-theoretic model to examine the issues of technology licensing and parallel importation in a setting with one leading manufacturer in a developed country (high market) that can license its innovative technology to one manufacturer in a developing country (low market). By considering that the high market is in a monopoly or in a duopoly, we investigate the impact of parallel importation on the profits of players and the unit licensing fee. Then, we analyze the leading manufacturer's optimal licensing decision considering parallel importation. We show that the leading manufacturer's profit is always worse off due to the emergence of parallel importation, no matter whether the high market is in a monopoly or in a duopoly. Nevertheless, the leading manufacturer may still have the motivation to license the technology. Interestingly, the leading manufacturer may reduce the unit licensing fee when parallel importation occurs in the duopoly setting. Furthermore, the profit of the manufacturer in the developing country may decrease when parallel importation arises, although parallel importation enhances the manufacturers’ overall market demand. The main insights extend to settings with alternative demand functions.
•Investigated original equipment manufacturer's pricing under secondary market.•Effects of presence of secondary market on decisions and consumer welfare.•Examined how the dynamic pricing and ...competition affect the optimal decisions.
As environmental regulations are becoming increasingly strict, firms are setting up remanufacturing systems and using trade-in programmes that take back used products to stimulate demand. Meanwhile, they are starting to sell remanufactured products to secondary markets to avoid the problem of cannibalization. In this study, we establish a two-period model in which a monopolistic original equipment manufacturer (OEM) offers a trade-in programme to improve sales and collect used products. At the same time, the OEM can elect to remanufacture these used products and resell them to a secondary market. The results for the static pricing case show that the two primary driving factors, customers’ maximum willingness to pay into the secondary market and production cost, produce different outcomes. Depending on the relationship between these two key factors, seven outcomes exist. Specifically, although all used products are collected and the secondary market is available, the OEM may not remanufacture or may partially remanufacture. We study the above problem using a dynamic pricing case in which the product price during the second period is different from that in the first period. We find that the OEM prefers to offer a menu such that all rather than just some holders participate in the trade-in programme. Furthermore, in the dynamic pricing case, all rather than some of these used products are remanufactured, in contrast with the static pricing case. However, the layout of the OEM's trade-in and remanufacturing policies under the static pricing case is similar to that under the dynamic pricing case. We further extend our study to include a competitive situation and find that the results for the core model can essentially be reproduced under competition.
Rapid advances of information technology in recent years have enabled both the manufacturers and the retailers to operate their own Internet channels. In this study, we investigate the interaction ...between the capabilities of introducing the Internet channels, the pricing strategies, and the channel structure. We classify consumers into two segments: grocery shoppers attach a higher utility from purchasing through the physical channel, whereas a priori Internet shoppers prefer purchasing online. We find that when the Internet shoppers are either highly profitable or fairly unimportant, the manufacturer prefers to facilitate the channel separation either through his own Internet channel or the retailer's. In the intermediate region, however, the manufacturer encroaches the grocery shoppers and steals the demand from the retailer's physical channel. With horizontal competition between retailers, a priori symmetric retailers may adopt different channel strategies as a stable market equilibrium. The manufacturer may willingly give up his Internet channel and leverage on the retailer competition. When the manufacturer sells through an online e‐tailer, Internet shoppers may be induced to purchase through the physical channel. This reverse encroachment strategy emerges because selling through the e‐tailer leads to a more severe double marginalization problem.
This article considers investment decisions within an uncertain dynamic and duopolistic framework. Each investment decision involves to determine the timing and the capacity level The simultaneous ...analysis of timing and capacity decisions extends work on entry deterrence/accommodation to consider a timing/delay element. We find that, when applying an entry deterrence policy, the first investor, or incumbent, overinvests in capacity for two reasons. First, it delays the investment of the second investor, or entrant. Second, the entrant will invest in less capacity. We also find that greater uncertainty makes entry deterrence more likely.
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