Department of Economics and Business Economics

Hongyan Jenny Li

A game-theoretical analysis of joint-rebate strategies in platform-based retailing systems

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

  • Hongyan Li
  • Shiming Deng, Huazhong University of Science and Technology

Rebates are commonly used as one of the most important short-term promotion tactics in retailing industries. In this paper, we study a platform-based retail system consisting of a retail platform who provides a retail facility and a product seller who sells products through the retail platform. The seller pays rent and also a percentage of his revenue to the platform as commissions for using the facility and services of the platform. In a promotion program, both the retail platform and the seller have strategic options of either offering rebates individually or launching a joint rebate. The parties are free to choose their rebate amounts, if any, and their decisions are, therefore, handled as endogenous decisions in our model. We investigate the optimal rebate strategies and performance of each party in the retail system analytically. Research results show that, given an exogenous retail price and a commission rate, the platform and the seller may choose a unilateral rebate or a joint-rebate program. For any log-concave demand function, we prove that an equilibrium on rebates of the platform and the seller exists and is unique. Furthermore, several managerial insights are presented with regard to the selection of rebate programs. Finally, we address the endogenous pricing problem as an extension of the original problem.

Original languageEnglish
JournalEURO Journal on Decision Processes
Pages (from-to)117-150
Number of pages34
Publication statusPublished - May 2019

    Research areas

  • Game-theoretical analysis, Joint-rebate, Platform-based retailing system, Pricing, Revenue sharing

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