Manufacturer encroachment and promotional effort on a hybrid online retailing platform

Online platforms that initially started as resellers have transitioned to operating in a hybrid mode. Manufacturers now face the choice of whether to encroach on platforms. Additionally, both manufacturers and online platforms are making promotional efforts to stimulate demand. This paper presents a game-theoretical framework that explores interactions between the platform’s promotional effort and the manufacturer encroachment within the context of a hybrid online platform. Through our analysis, we provide comprehensive insights into equilibria and assess the implications of both encroachment and promotional effort. Our results show that the owner of the platform (called “e-tailer”) always voluntarily exerts promotional effort and this can be a win–win tactic. Furthermore, the e-tailer’s choice to implement promotional efforts extends the boundaries within which the manufacturer finds encroachment advantageous, creating a larger area where both participants can derive advantages from encroachment. Notably, we find that the encroachment and exerting promotional effort are complementary under certain conditions. Finally, we extend the basic model to obtain additional insights. Our analysis provides strategic support for managers and elucidates the interaction between the strategies of manufacturers and platforms, highlighting the mutual influence of their respective strategic choices.