[Mingli Lecture Hall, Issue 49,2020] 12-29,University of Florida,Professor Hsing Kenneth Cheng: Impact of Own Brand Product Introduction on Optimal Pricing Models for Platform and Incumbent Sellers

Time: December 29th (Tuesday) at 9:00 am-10:30 am

Meeting number: Tencent Conference 209 499 242

Speaker profile:

Professor Hsing Kenneth Cheng is the University of Florida, John B.Higdon Distinguished Scholar and Head of the Department of Information Systems and Operations Management, Warrington Business School.He received his PhD in Computer and Information Systems from the University of Rochester in 1992.Professor Zheng's main research direction is the analysis of the impact of Internet technology on software development and marketing, and the information system policy issues (especially the national debate on net neutrality).Based on papers published in the top three information systems journals, Professor Zheng was ranked 20th (2009-2011) and 16th (2010-2012)among 200 information system researchers worldwide.Professor Zheng is currently deputy editor of Decision Sciences and senior editor of Journal of the Association for Information Systems, Information Systems and electronic Management.Associate Editor of Information Systems Research from 2011-2014, served on the project committee of many information system conferences and seminars, and as chairman of Workshop on E-Business (2003 Year, 2012) and co-chair of the Taiwan Summer Workshop on Information Management project.

Report Content Description:

Sales on the e-commerce platform in the United States have experienced explosive growth and are projected to surpass 740 billion in 2023. The expansion of the platform's traditional role as a platform into an online marketplace and the introduction of its own brand products have stoked a huge fear among the incumbent sellers. The platform's unfair anti- competitive practice further aggravates the situation. Consequently, politicians and regulators have proposed prohibiting platforms from introducing own brand product in order to protect the incumbent sellers. This study addresses two research questions of critical interest to both the policy makers and the incumbent sellers. First, is the platform's introducing its own brand product always detrimental to the incumbent sellers? Second, how effective is the proposed policy in terms of protecting the incumbent sellers? We examine the impact of the platform's own brand introduction on the incumbent sellers under two prevailing sell-on and sell-to pricing contracts. We find that the proposed legislation “that prohibits platforms from both offering a marketplace for commerce and participating in that marketplace” does not have the desired outcome of helping the incumbent sellers. Instead, it forces the platform to adopt only the sell-to contract with own brand introduction that always hurts the sellers. Interestingly, when the own brand introduction is banned under the sell-to contract, the incumbent sellers can be better off because the platform's strategic reaction to the enforcement can lead to the best scenario for the incumbent sellers. If the ban is imposed on both the sell-on and sell-to contracts, the platform's best response is to add another new brand competing with the incumbent sellers, which can also help the incumbent sellers, however, not as much as in the case of the enforcement only under the sell-to contract.

(Organized by: Department of Management Engineering, Scientific Research and Academic Exchange Center)