E-Commerce Platform Decision-Making Under Subsidy Strategy

Sales price subsidy is a tool of vicious competition among e-commerce platforms. E-commerce platforms influence consumers' purchase decision by subsidizing consumers' prices, achieve the goal of winning the market share competition. This paper uses the WTP game model to analyze the choice of subsidy strategies for two e-commerce platforms, Analyze the impact of no-subsidy strategy, single-platform subsidy strategy and dual-platform subsidy strategy on e-commerce platform costs, third-party sellers' pricing and revenue, and consumer surplus. The results show that, (1) E-commerce platforms with weak brand awareness are more willing to first choose to change the market structure through price subsidy strategies; (2) Under the subsidy strategy of e-commerce platforms, 3P seller will obtain more income by increasing prices; (3) The competition of sales price subsidies among e-commerce platforms will lead to a decrease in their revenue or even a loss; (4) Subsidy strategies of e-commerce platforms can increase third-party sellers’ profit and consumer surplus.