Opaque Distribution Channel for Service Providers with Asymmetric Capacities: Posted Price Mechanisms

Posted: 15 Jul 2017

See all articles by Zhaofang Mao

Zhaofang Mao

College of Management and Economics, Tianjin University

Wei Liu

Tianjin University

Bo Feng

School of Business Administration, South China University of Technology

Date Written: July 8, 2017

Abstract

New ecommerce model called online to offline (O2O) e-commerce has gotten significant managerial and academic attention these years. One of its latest developments in travel industry is opaque selling, which facilitates service providers to provide a new channel to customers. This study uses game models to analyze whether service providers with asymmetric capacities should develop contract with an intermediary in the opaque distribution channel, where the Posted Price mechanism is used to sell opaque services. We build model frameworks for traditional and opaque selling cases, and characterize various optimal pricing strategies. A revenue sharing contract is designed between service providers and an intermediary operating opaque distribution channel. We then compare the profits in the two cases and find some interesting results driven by asymmetric capacities as well as other related factors. Firstly, the level of capacity asymmetry of collaborative service providers has an important effect on their contract decision with the intermediary. Specifically, they may not sign contract with the intermediary when service providers’ capacities are highly asymmetric. Secondly, the collaborative service providers’ capacities have a great impact on their optimal profits and pricing strategies. Lastly, the relative patience of collaborative service providers is also an important factor that affects their strategic choice.

Keywords: Opaque Selling; Posted Price; Revenue Sharing Contract; Optimal Pricing; Stackelberg Game

JEL Classification: C61

Suggested Citation

Mao, Zhaofang and Liu, Wei and Feng, Bo, Opaque Distribution Channel for Service Providers with Asymmetric Capacities: Posted Price Mechanisms (July 8, 2017). Available at SSRN: https://ssrn.com/abstract=2999036

Zhaofang Mao

College of Management and Economics, Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Wei Liu

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Bo Feng (Contact Author)

School of Business Administration, South China University of Technology ( email )

Wushan
Guangzhou, AR Guangdong 510640
China

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