PRICING STRATEGY AND PRODUCT QUALITY DESIGN WITH PLATFORM-INVESTMENT

Abstract

With the development of business, more consumers are quality sensitive and improving the product quality becomes particularly important. We mainly discuss two investment strategies: retailer-investment and platforminvestment. Compared with non-investment case, only if consumer sensitivity is not too high, it is profitable for the retailer to select retailer-investment. When both retailer-investment and platform-investment are viable, the choice of investment mechanism depends on the profit-sharing ratio. Particularly, if the ratio is within a certain range, the optimal investment strategy is platforminvestment, achieving a triple-win outcome. Besides, to effectively alleviate the contradiction between the retailer’s moral hazard problem and the sustainable value-added effect of platform-investment, we further research the contract term. These results give us some meaningful management inspirations in investment mechanism