Model Comparison Between The Social E-Commerce And The Traditional E-Commerce Based On Dynamic Game

Recent years have witnessed a surge in both online selling and social networking.Social e-commerce,which combines the two together,enables millions of consumers to purchase products through independent sellers in their own(online)social communities.Unlike to traditional e-commerce,social e-commerce platforms distribute their products through different individual sellers who are endowed with private traffic.From the perspective of consumers,on one hand,one may intuit consumers would become worse off because of price discrimination in social e-commerce.On the other hand,since the integration of online selling and social networking makes it more efficient for consumers to interact with sellers and facilitates consumers to share shopping experience with friends,such social interactions can generate additional utility for consumers.From the perspective of firms,it is imperative to figure out the effects of consumer segmentation on their price strategies and profitability.However,there is little guideline on how to choose individual sellers and,more importantly,how to segment market for them.This paper focus on whether the social e-commerce model is necessarily better than the traditional model for different supply chain members.We develop a framework to specify the two e-commerce models.Then we examine the impacts of consumer segmentation(captured by quality-valuation cutoff)and social interaction utility on the optimal prices,firms’profitability and consumer surplus.We also extend our basic model in two directions that:(i)there are switchers who have access to different individual sellers and(ii)consumers are heterogeneous on both product valuation and social interaction utility.We highlight some important findings as following.First,our analysis shows that the social e-commerce platform’s profitability will increase in the communities’ quality-valuation cutoff.It suggests that firms prefer the unbalanced market structure.Specifically,it will benefit the social e-commerce platform when the high-end seller niches fewer consumers of sufficiently high valuation while the low-end seller serves most of the remaining market.Second,even with more levels of distributors in the channel structure,the social e-commerce model may reduce the wholesale price and the retail price of the low-end sellers,it happens when both the quality-valuation cutoff and the social interaction utility are relatively low.Third,the social e-commerce model can lead to win-win,lose-lose,or win-lose outcomes for the firms and consumers,and it would be more likely to benefit firms than consumers as the quality-valuation cutoff increases.Only when consumers’ social interaction utility is large enough,both consumers and firms will be better off in social e-commerce.This paper ends by drawing the conclusions and limits,and coming up with some directions for the future research.