Artificial intelligence-powered recommendation systems have gained popularity as a tool to enhance user experience and boost sales. Platforms often need to make decisions about which seller to recommend and the strength of the recommendation when conducting recommendations. Therefore, it is necessary to explore the recommendation strategy of the platform in the case of duopoly competition. We develop a game model where two competing manufacturers sell products through an agency contract on a common platform, and they can decide whether or not to provide recommendations to the manufacturers. Our highlight lies in the endogenous recommendation strength of the platform. The findings suggest that it is optimal for the platform to offer recommendation services when the commission rate is high. The platform also prefers to only recommend one manufacturer in the market with low or high competition, but it prefers to recommend both manufacturers in moderately competitive markets. From the view of manufacturers, they can benefit from the recommendation service as long as the commission rate is not too low. Moreover, recommending only one manufacturer consistently yields stronger recommendations compared to recommending multiple manufacturers. However, the impact of recommendation on prices is influenced by the commission rate and product substitutability. These results have significant implications for platform decision making and provide valuable insights into the trade-offs involved in the development of recommendation systems.
1 February 2020 in Computers & Industrial Engineering
The growth of e-commerce live streaming has expanded sales channel options for fresh agricultural suppliers. This study investigates a two-echelon supply chain consisting of a fresh agricultural supplier and downstream retailers. Using differential game theory, we examine the supplier’s preservation technology level and product greenness, analyzing and comparing equilibrium strategies under three different modes: e-commerce platform sales mode (SP), head streamer sales mode (SH) and ordinary streamer sales mode (SN). The results demonstrate that SP is the dominant strategy when retailers’ marginal profits are low. Conversely, under high marginal profit conditions, the optimal selection depends on streamer cooperation costs: SH is preferred with low head streamer costs; widening cost gaps introduce temporal considerations between SH and SN; further gap expansion makes SN optimal. Furthermore, product greenness is related to supplier’s marginal profit, while the preservation technology level is jointly determined by supplier’s marginal profit and retailers’ inspection costs. Finally, combinations of these modes are also investigated.
4 March 2020 in Mathematical Problems in Engineering
One-way substitution means that when low-end brand goods are sold out, high-end brand goods can be offered to consumers as substitute goods, but not the opposite. In realistic economic activity, “shortage of funds” is a common practical problem for the retailer in making order decision. This paper proposes a nonlinear optimization model with the retailer’s budget to study the optimal order quantities and substitution discount for two one-way substitution products under a stochastic demand scenario, and the objective is to maximize the retailer’s revenue. We solve the model mainly according to the Karush–Kuhn–Tucker (KKT) theorem and present the conditions of optimal decisions. Finally, through the numerical study, we analyze the influence of the budget constraint and other parameters on the optimal solutions.