Product Recommender Strategy for a Reselling E-commerce Platform

The reselling mode is widely adopted bye-commerce platforms like Amazon and JD.com. Moreover, platforms build product recommender systems to enhance their marketing capa-bilities. However, platforms and sellers face difficulties in deciding when to adopt recommender systems and how to adjust product prices in the presence of recommender systems. Using a game-theoretic model, this paper analyses the economic impacts of a recommender system on product prices and firm profits. We unveil the conditions under which the platform should introduce the recommender system and present the equilibrium pricing and recommendation strategies of the platform and its upstream sellers. A core finding is that the recommender system can benefit both the platform and the sellers if it is designed for encouraging the improving consumer net utility rather than simply pursuing the platform's profit maximization.