A game theoretic strategic model for understanding the online-offline competition and fairness concern under community group buying

Ying Wang; Haohao Song

doi:10.3934/jimo.2022012

Article Contents

2023, Volume 19, Issue 3: 1670-1696. Doi: 10.3934/jimo.2022012

This issue Previous Article Resource allocation scheduling with deteriorating jobs and position-dependent workloads Next Article Stochastic production planning with regime switching

A game theoretic strategic model for understanding the online-offline competition and fairness concern under community group buying

Ying Wang and
Haohao Song^,

College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, Jiangsu, China

^*Corresponding author: Haohao Song
^*Corresponding author: Haohao Song

Received: July 31, 2021

Revised: October 31, 2021

Early access: February 2022

Published: March 2023

Our study is supported by National Natural Science Foundation of China (Grant No. 71873064), General Projects of Humanities and Social Sciences of the Ministry of Education (Planning Projects) (Grant No. 18YJA790085), and Social Science Fund Project of Jiangsu Province (Grant No. 21EYB008)

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Abstract

The continuous growth of e-commerce leads to the emergence of a new supply chain model known as community group buying, which is advantageous to address the inefficiencies and higher costs of intermediate processes. However, its appearance results in fairness concerns for other participating merchants. In this regard, we construct a model with two suppliers, one wholesaler, and two retailers for three different scenarios of the initial status, fairness neutrality, and fairness concern, and comparatively analyze the game equilibria in different scenarios. The results show that the profits of the suppliers and the wholesaler significantly increase after the online retailer enters into the market, whereas the offline retailer's profit has multiple prospects. The online retailer's entry into the marketplace weakens the market position of the offline retailer and significantly erodes its pricing advantage. Additionally, our paper finds that the entry of the online retailer is beneficial for social welfare, and investment conversion efficiency on the platform construction is the core factor for the improvement of social welfare. On the contrary, the influence of fairness concern on social welfare is quite limited and only affects the internal distribution of benefits.

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Mathematics Subject Classification: 91A10, 91B06, 91B16.

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Figure 1. Traditional supply chain operation model

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Figure 2. Online-offline chain operation model

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Figure 3. Relationships between equilibrium outcomes and $ \eta $

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Figure 4. Relationship between equilibrium outcomes and $ \eta $, $ \lambda $

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Figure 5. Relationship between each participant's profit and $ \eta $, $ \lambda $

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Figure 6. Relationship between social welfare and $ \eta $, $ \lambda $

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Table 1. Description of different parameters

Parameters	Descriptions
$S_i$	Supplier
$W$	Wholesaler
$R_i$	Retailer
$C$	Comsumer
$D_i$	Demand of the products
$SW$	Social welfare
$\alpha$	Maximum capacity of the products
$\beta$	Price parameter
$\gamma$	Substitution parameter
$\omega_i$	Unit wholesale price sold by the supplier to the wholesaler
$x$	wholesaler's unit markup
$y$	retailer's unit markup
$t$	discount of the online retailer
$\lambda$	parameter of fairness concern
$\eta$	parameter of investment efficiency
$, *$	Superscripts of fairness neutral and fairness concerned
$\pi$	Profits of the suppliers, the wholesaler, and the retailers

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