The effect of P2P marketplaces on retailing in the presence of mismatch risk

Consumers frequently face mismatch risk as goods they purchase may be deemed inappropriate or below expectations. Due to this risk, consumers may avoid purchasing such goods and consequently hurt retailers. Can the emergence of peer-to-peer (P2P) marketplaces benefit retailers? On the one hand, P2P...

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Bibliographic Details
Main Author: Jiang, Lifei
Language:en
Published: 2014
Subjects:
Online Access:http://hdl.handle.net/10012/8315
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spelling ndltd-LACETR-oai-collectionscanada.gc.ca-OWTU.10012-83152014-06-18T03:51:39Z The effect of P2P marketplaces on retailing in the presence of mismatch risk Jiang, Lifei mismatch risk P2P marketplace retailing strategy backward induction Consumers frequently face mismatch risk as goods they purchase may be deemed inappropriate or below expectations. Due to this risk, consumers may avoid purchasing such goods and consequently hurt retailers. Can the emergence of peer-to-peer (P2P) marketplaces benefit retailers? On the one hand, P2P marketplaces can mitigate some of this risk by allowing consumers to trade mismatched goods. On the other hand, P2P marketplaces impose a threat on retailers as they compete with them over consumers. We develop a two-period model that highlights the effects introduced by P2P marketplaces. We show that a P2P marketplace benefits both the retailer and consumers when the wholesale price is sufficiently high and hurts them both when the wholesale price is low. The introduction of a P2P marketplace can relieve consumers from the mismatch risk and induces the retailer to post a higher price. However, when the wholesale price is low, the platform manages to extract most, or all, of the consumers surplus and directly hurts consumers, and eventually the retailer who experiences lower sales in both periods. With a high wholesale price the P2P marketplace is limited in its ability of extracting consumer surplus, which increases the retailer sales and benefits both the retailer and consumers. We further observe that social welfare is generally higher unless the wholesale price is relatively low. 2014-04-10T18:58:52Z 2014-04-10T18:58:52Z 2014-04-10 2014 Thesis or Dissertation http://hdl.handle.net/10012/8315 en
collection NDLTD
language en
sources NDLTD
topic mismatch risk
P2P marketplace
retailing strategy
backward induction
spellingShingle mismatch risk
P2P marketplace
retailing strategy
backward induction
Jiang, Lifei
The effect of P2P marketplaces on retailing in the presence of mismatch risk
description Consumers frequently face mismatch risk as goods they purchase may be deemed inappropriate or below expectations. Due to this risk, consumers may avoid purchasing such goods and consequently hurt retailers. Can the emergence of peer-to-peer (P2P) marketplaces benefit retailers? On the one hand, P2P marketplaces can mitigate some of this risk by allowing consumers to trade mismatched goods. On the other hand, P2P marketplaces impose a threat on retailers as they compete with them over consumers. We develop a two-period model that highlights the effects introduced by P2P marketplaces. We show that a P2P marketplace benefits both the retailer and consumers when the wholesale price is sufficiently high and hurts them both when the wholesale price is low. The introduction of a P2P marketplace can relieve consumers from the mismatch risk and induces the retailer to post a higher price. However, when the wholesale price is low, the platform manages to extract most, or all, of the consumers surplus and directly hurts consumers, and eventually the retailer who experiences lower sales in both periods. With a high wholesale price the P2P marketplace is limited in its ability of extracting consumer surplus, which increases the retailer sales and benefits both the retailer and consumers. We further observe that social welfare is generally higher unless the wholesale price is relatively low.
author Jiang, Lifei
author_facet Jiang, Lifei
author_sort Jiang, Lifei
title The effect of P2P marketplaces on retailing in the presence of mismatch risk
title_short The effect of P2P marketplaces on retailing in the presence of mismatch risk
title_full The effect of P2P marketplaces on retailing in the presence of mismatch risk
title_fullStr The effect of P2P marketplaces on retailing in the presence of mismatch risk
title_full_unstemmed The effect of P2P marketplaces on retailing in the presence of mismatch risk
title_sort effect of p2p marketplaces on retailing in the presence of mismatch risk
publishDate 2014
url http://hdl.handle.net/10012/8315
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