E-commerce supply chain decisions under platform digital empowerment-induced demand

We develop a game model for a supply chain consisting of one e-commerce platform and multiple retailers. The platform with operational data of each retail store can effectively help retailers select marketable products and then improve their operational efficiency. We first investigate the motivation of retailers in accepting the platform digital empowerment (PDE) and joining the platform. We find that the retailer should join the platform and choose PDE only when the sales effort cost coefficient is high and the effect of sales effort on demand is weak. Second, we investigate the influence of the number of retailers on the platform network effect and find that the more retailers on the platform, the more profits the retailers and the e-commerce platform will make. Besides, the retailers’ sales efforts and the PDE level will increase. Third, we study the PDE decisions under the unconstrained and decentralized control system (DC), the decentralized control system with revenue sharing contract (RS) and the decentralized control system with profit sharing contract (PS), respectively. We find that the platform’s profit in PS is the highest among these systems if the sales effort cost coefficient is high. Furthermore, for these systems, the PDE level under DC is always the highest if the effort cost is low; otherwise, the PDE level under PS is the highest. In addition, the sales effort under DC is always the highest if PDE is employed, that is, nether RS nor PS can effectively promote the retailer’s sales effort.