Centralized or competitive pricing? Strategies for C2C sharing platforms under demand and quality information asymmetry

Consumer-to-consumer (C2C) sharing platforms provide online facilities enabling small independent suppliers to reach a much larger market than otherwise possible. Generally, the platform has more information about the demand than suppliers, while suppliers possess more private information about product quality. This study develops a theoretical model to investigate pricing strategies for C2C sharing platforms incorporating the effects of demand and quality information asymmetry. Three important questions are examined: (1) Who should set the prices for the products (the platform or the suppliers), namely centralized or competitive pricing? (2) If pricing authority is given to suppliers, should the platform share the demand information with suppliers? (3) How does pricing strategy interact with the platform’s service investment decision? Results reveal that optimal pricing strategies depend heavily on the suppliers’ product quality gap. The platform benefits from centralized pricing if the quality gap is relatively low, and decentralizing the pricing authority to suppliers otherwise. Under decentralized pricing, the platform chooses not to share demand information and decrease the service level if service investment cost is relatively high and the demand variability is relatively small. Furthermore, the results show that a high-quality supplier benefits more from centralized pricing than a low-quality supplier, which is counter-intuitive.