Traditionally, the online retailer has adopted the wholesale pricing model to work with heterogeneous manufacturers, that is, the retailer buys the products from the competitive manufacturers and then resells them to customers. Recently, the increasing prevalence of online retailing has given rise to a novel agency pricing model; that is, the manufacturers sell their products directly to customers on the retailer’s platform, and the retailer charges a commission fee for each sale. Meanwhile, customer loyalty is an important determinant of long-term business success for the retail platform. Considering the customer with loyalty, this paper investigates how the chosen pricing model (wholesale pricing model or agency pricing model) affects the online retailer’s profit, industry profit, consumer surplus, and social welfare. We find that the latter model always leads to a lower retail price and higher consumer surplus. More important, we also show that the industry profit and social welfare increase when the online retailer switches from the former model to the latter one. However, the online retailer’s profit critically depends on customer loyalty. Specifically, when customer loyalty is strong enough, the online retailer should adopt the agency pricing model. Otherwise, the wholesale pricing model dominates.

The “buy online and pick up in store” (BOPS) mode is gaining tremendous popularity among retailers since it is convenient for consumers and brings additional store sales to retailers. However, operating the BOPS channel requires additional investment, which is a challenge for retailers. This article considers the pricing strategies of competing dual-channel retailers, focuses on whether and when they should adopt the BOPS strategy, and explores the impacts of market factors on the equilibrium outcomes. Since retailers’ decisions are usually made sequentially in reality, we use the Stackelberg game model to analyze retailers’ optimal strategies. First, we show that the follower's price is not always lower than the leader's price. Specifically, when the unit additional profit from cross-selling of the follower is low enough, the follower will set a higher price than the leader. Second, we find that retailers prefer the BOPS strategy when the fixed costs for offering BOPS channels are low enough, or when the difference between the additional profits from cross-selling of two retailers is sufficiently large. Third, we present an interesting insight: an increase in product return probability or retailer cost of handling a returned product can be beneficial to retailers.

Many software firms, especially mobile app providers, offer perpetually free basic products to users, but premiums are charged for access to the additional features or functionalities. While the free offering helps capture potential customers, it might cannibalize the sales of premium goods or services. This paper adopts a game theoretical approach to examine the impact of free offering on the competition between two firms in the presence of network effects. The firms can either offer a free core product and a paid service or offer them as a bundle. The core product has stand-alone value and can be used separately but the value-added service has no value without the core product. We derive the market equilibria and present conditions under which the free offering strategy outperforms the bundling strategy. We show that when a firm’s core product has a sufficient advantage in product quality, it is better for this firm to sell the bundle but for the other to use free strategy. However, if the core products are similar in terms of quality, it is optimal for them to use the same strategies. Whether to offer a free product depends largely on the core products’ quality. We also show that the firms may be caught in a prisoner’s dilemma when both adopt the free strategy. Finally, we find that the profitability of the firm that offers a free product always increases in network effects intensity and market size, but this is not the case for the firm that sells the bundle. This study contributes to understanding the behavior of feature-limited free offering in a duopoly setting. Our findings also provide insights into the design of free product and the impact of network effects on the firms’ offering decisions.

In this paper, we investigate a manufacturer’s online selling strategy choice between wholesale selling and agency selling, and discuss its impact in the presence of spillovers from online to offline sales. We find that the manufacturer’s optimal online selling strategies vary with consumers’ online channel acceptance and the extent of the spillover effect. In particular, when the online channel acceptance is high, the manufacturer prefers the agency selling strategy. When the online channel acceptance is moderate, if the sale in the online channel leads to a negative spillover effect on demand in the offline channel, the manufacturer has an incentive to adopt the wholesale selling strategy; otherwise, the agency selling strategy is a preferred choice for the manufacturer. When the online channel acceptance is low, if the sale in the online channel leads to a significant negative or a positive spillover effect on demand in the offline channel, the manufacturer should adopt the agency selling strategy; otherwise, reselling the products to an e-tailer is an optimal choice. Moreover, under certain conditions, we find a “win-win-win” result for the manufacturer, the offline retailer, and the online platform by adopting the agency selling strategy. Finally, we show that two types of spillover (i.e., stimulation effect and cannibalization effect) have different influences on supply chain participants.

Multimedia social networks have been introduced as a new technology to enrich people's lives through enhanced multimedia distribution. On the other hand, a media cloud system can perform multimedia processing and storage, and provide heterogeneous multimedia services. However, the challenges still remain for end users (e.g., mobile devices and PCs) to receive multimedia streaming from the cloud system with satisfied quality-of-service (QoS). To address these challenges, an efficient multimedia distribution approach taking advantage of live-streaming social networks is innovated in this paper to deliver the media services from the cloud to both desktop and wireless end users. Our approach allows bandwidth limited mobile users to acquire live multimedia streaming from desktop users, directly based on their social relationships rather than from the cloud. When a number of mobile users compete for limited bandwidth access with the desktop users, a bandwidth allocation problem must be solved to meet all users' QoS requirements in the live-streaming social network. We formulate the problem as a two-stage Stackelberg game, in which both desktop users and mobile users target at maximizing their utilities. In our study, a noncooperative game is used to model the competition among the desktop users in terms of shared bandwidth and price in the first stage of the game. The second stage of the game models the behavior of a mobile user selecting the desktop users by an evolutionary game. In addition, a case study is conducted following the general Stackelberg game formulation, where the existence of a unique Nash equilibrium is proved. Based on our game modeling, we design protocols for both desktop and mobile users and evaluate them with numerical examples.

We address the impacts of social effects and service quality on business model decisions through a game-theoretic model. These platforms, which integrate social networking services into their services, adopt either an advertising strategy or a freemium strategy. Thus, four strategy combinations that include two strategic substitute cases in which both platforms use either an advertising strategy or a freemium strategy and two strategic complement cases in which the platforms adopt different strategies are possible. We find that the advertising (freemium) strategy is dominant for each platform when its premium service quality is too low (high). Two equilibria in which both platforms adopt advertising and freemium strategies coexist, while the former one derives more profit. Moreover, we study the symmetric platform competition in which platforms use an advertising strategy or a freemium strategy simultaneously. Interestingly, we find if the strength of social effects is medium, the freemium strategy is also dominant when the quality of the premium service is too low. Finally, a win–win outcome that benefits customer surplus and platforms may arise under some conditions under which the basic service quality is too low (high), the premium service quality is too high (low), and a freemium (advertising) strategy is used.