Disintermediation and co-opetition in platform ecosystems and modern value chains

textThis dissertation investigates partial disintermediation and co-opetition in platform-based ecosystems and modern supply chains. Disintermediation has been an intriguing puzzle for managers for the last several decades, but recent development in electronic commerce makes the management of this trade-off even more challenging. The first type of partial disintermediation I study, often referred to as platform envelopment, is widely observed in platform-based businesses. Platform owners often rely on complementary innovations from third-party providers (i.e., third-party contents), while providing their own products/services to consumers (i.e., first-party contents). The second type of partial disintermediation I study is referred to as supplier encroachment. Due to the fast development of electronic commerce, many manufacturers have established their direct-selling channels on the internet (e.g., online stores), instead of completely relying on third-party retailers to reach customers. The widespread observation of disintermediation and the resulting co-opetition behaviors in various industries has motivated me to investigate two important questions: (1) what's the impact of partial disintermediation on consumer demand and firm profits? (2) what strategies can be used to manage the co-opetition relationship? I use both analytical modeling and empirical methods to study the impact of disintermediation on consumer behaviors, firm profits, and social welfare. The findings provide managerial insights into how to manage the co-opetition dilemma due to disintermediation.Information, Risk, and Operations Management (IROM

To share or not to share: the optimal advertising effort with asymmetric advertising effectiveness

In this paper, we study a two-stage model in which a manufacturer expands to a new market through a local retailer and has private information on the advertising effectiveness. The manufacturer chooses the information sharing format with the retailer, either no information sharing or mandatory information sharing. Under no information sharing format, the manufacturer and the retailer play a signaling game. We derive both separating and pooling equilibria and conduct equilibrium refinements for the signaling game. Under mandatory information sharing format, the manufacturer simply informs the retailer the advertising effectiveness. We also establish the stylized model and derive the optimal advertising effort. By comparing the manufacturer’s ex ante profit under the two information sharing formats, we find that the manufacturer always prefers mandatory information sharing, under which both the advertising effort and profit can be higher. We also observe that unlike the common case that the channel members may have different preference over the information sharing formats, the manufacturer and the retailer can actually achieve alignment. While some previous studies suggest that the manufacturer and the retailer may have different preference over the information sharing formats, we find that they can actually achieve alignment with asymmetric information on advertising effectiveness

Online expansion: is it another kind of strategic manufacturer response to a dominant retailer?

YesThe issues of channel conflict and channel power have received widespread research attention, including Geylani et al.’s (2007) work on channel relations in an asymmetric retail setting. Specifically, these authors suggest that a manufacturer can respond to a dominant retailer’s pricing pressure by raising the wholesale price for a weak retailer over that for the dominant retailer while transferring demand to the weak retailer channel via cooperative advertising. But, is online expansion another kind of strategic manufacturer’s optimal response to a dominant retailer? In this paper, we extend this work by adding a direct online selling channel to illustrate the impact of the manufacturer’s internet entry on firms’ demands, profits, and pricing strategies and on consumer welfare. Our analysis thus includes a condition in which the manufacturer can add an online channel. If such an online channel is opened, the channel-supported network externality will always benefit the manufacturer but hurt the retailers. Consumers, however, will only benefit from the network externality when a dominant retailer is present and will be hurt when both retailers are symmetric.National Natural Science Foundation of China, Chongqing’s Natural Science Foundation, British Academ

Three Essays on Irregular Entries to the End-Customer Market

I study irregular entries to the end-customer market and the impact of such entries on suppliers, buyers, and customers. I am particularly interested in the irregularities of supplier encroachment and counterfeiting problems. This dissertation addresses these issues and proposes solutions in the form of three essays. In the first essay, I study a supply chain, consisting of a supplier and a buyer where the supplier can encroach on the end-customer market and keeps private information on its own production capacity. The supplier can decide on its capacity allocation and the buyer can order strategically, hoarding the supply capacity, to remove the competition. I find that the supplier is worse off, and the buyer is better off, when the supplier keeps its capacity information private. Further, I demonstrate that the supplier may no longer encroach on the end-customer market when it has more capacity. The second and third essays are inspired by the counterfeiting problem on online e-commerce platforms. In the second essay, I develop an algorithm that analyzes customers’ reviews on an online platform and provides an authenticity score for the products. I trained context-specific word embedding based on a large corpus of Amazon customer reviews to show that my unsupervised methodology provides good predictive power. Next, I study the effect of customers’ reviews on an e-commerce platform’s anti-counterfeiting strategy against third-party sellers. The platform can provide a tool for customers that analyzes just the product reviews or a more advanced tool that analyzes both the product and seller reviews to help customers determine if products are fake or genuine. On the seller’s side, it can choose to reveal its fake products by charging a lower separating price based on its profit under these two options. I demonstrate that even when the tools are free, the platform does not provide the advanced tool if the seller sells products with a low authenticity score (fake products), and it provides the basic tool if and only if the demand of the genuine product is sufficiently high. Together, these papers provide solutions on how to maximize profits by making informed decisions in the face of market irregularities for the supplier, the buyer, and the customer

Should competing firms reveal their capacity?

In this article, we explore when firms have an incentive to hide (or reveal) their capacity information. We consider two firms that aim to maximize profits over time and face limited capacity. One or both of the firms have private information on their own capacity levels, and they update their beliefs about their rival's capacity based on their observation of the other firm's output. We focus on credible revelation mechanisms—a firm may signal its capacity through overproduction, compared to its myopic production levels. We characterize conditions when high‐capacity firms may have the incentive and capability to signal their capacity levels by overproduction. We show that prior beliefs about capacity play a crucial, and surprisingly complex, role on whether the firm would prefer to reveal its capacity or not. A surprising result is that, despite the fact that it may be best for the high‐capacity firm to overproduce to reveal its capacity when capacity information is private, it may end up with more profits than if all capacity information were public knowledge in the first place. © 2013 Wiley Periodicals, Inc. Naval Research Logistics, 2013Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/96261/1/21521_ftp.pd

Asymmetric Information Mitigation in Supply Chain: A Systematic Literature Review

With the level of competition and consumer demand is changing rapidly, the speed and accuracy of the information flow in the supply chain increasingly necessary. Sharing of information between the parties in a supply chain plays an important role in improving the sustainability of a business, but imperfection information is inevitable because each party in the supply chain has a different objective. This condition increases the importance of a research on the mitigation of asymmetric information in the supply chain, therefore the purpose of this study was to conduct a review of previous studies related to overcoming the asymmetric information and map research trend on mitigating asymmetric information in the supply chain. We used systematic literature review (SLR) methods to analyze the data collected from Web of Science and Scopus database from 2005 to 2016. The results of this study can be used as a guide and a reference for further research related to overcoming the asymmetry of information in the supply chain in every industrial sector

Decision Making Under Information Asymmetry: Experimental Evidence on Belief Refinements

We explore how individuals make decisions in an operations management setting when there is information asymmetry between the firm and an outside investor. A common assumption in the signaling game literature is that beliefs among the participants in the game are refined using the Intuitive Criterion refinement. Our experimental results provide evidence that the predictive power of this refinement is quite low, and that the Undefeated refinement better captures actual choice behavior. This is surprising because the Intuitive Criterion refinement is the most commonly utilized belief refinement in the literature while the Undefeated refinement is rarely employed. Our results have material implications for both research and practice because the Undefeated and Intuitive Criterion refinements often produce divergent predictions. Our results demonstrate that conformance to the Undefeated and Intuitive Criterion refinements is influenced by changes in the underlying newsvendor model parameters. We also show that adherence to the Undefeated refinement is especially pronounced among subjects who report a high level of understanding of the game and that subjects whose choices conformed with the predictions of the Undefeated refinement were rewarded by investors with higher payoffs in the game. Finally, we demonstrate, through a reexamination of Cachon and Lariviere (2001), how the application of the Undefeated refinement can substantively extend the implications of extant signaling game theory in the operations management literature