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Exclusivity decision of platforms' first-party products in a competitive market.
- Source :
-
Information Technology & Management . Dec2023, Vol. 24 Issue 4, p353-366. 14p. - Publication Year :
- 2023
-
Abstract
- Product exclusivity is a well-known strategy adopted by agencies to attract buyers. Although some platform firms develop first-party products to improve competitiveness, we show that they do not necessarily benefit from the exclusivity of these products in a competitive market. Platforms may sell their first-party products on their competitive platforms, which we call the non-exclusive strategy. The impact of the non-exclusive strategy on firms' profits is the result of an interaction between a competition effect and a demand effect. The competition effect is that the non-exclusive strategy reduces the differentiation between firms, and the investment strategy on the first-party product has no impact on the price competition between firms. The competition effect causes firms to intensify price competition and decrease the investment for their first-party product. The demand effect is that, in the presence of the non-exclusive strategy, the firm can obtain a sale profit from the first-party products in the competitive platform. The demand effect causes firms to diminish price competition and increase investments in first-party products. As a result of these two effects, we find that firms are more likely to benefit from the exclusivity of the first-party products only when the unit misfit cost is sufficiently high. We also find that firms implementing the non-exclusivity strategy will reduce the investment in the first-party product if the consumers' performance sensitivity is low. When platforms develop the targeted investment in first-party products, we can also see that the exclusivity of the first-party product is not always beneficial to the platform. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 1385951X
- Volume :
- 24
- Issue :
- 4
- Database :
- Academic Search Index
- Journal :
- Information Technology & Management
- Publication Type :
- Academic Journal
- Accession number :
- 173017201
- Full Text :
- https://doi.org/10.1007/s10799-021-00345-5