Impact of Information Sharing on Distribution Mode Choice With Spillover Effects and Upstream Competition

The boom of e-commerce has led to the rise of copycats but also encouraged more manufacturers to join these platforms for product distribution. Using a game-theoretic framework, we investigate whether a brand manufacturer faced with copycat competition and asymmetric demand information should enter the online channel, focusing on the impact of platform information sharing on brand manufacturer distribution mode choice in a multichannel retail environment. The main findings are as follows: First, when the platform does not share information, the brand manufacturer prefers the agency mode under the positive spillover effect if the commission rate is moderate. The platform’s sharing strategy increases the brand manufacturer’s preference for the agency mode. However, when the commission rate is sufficiently low or high, the distribution mode of the brand manufacturer is unaffected by the information-sharing strategy. Second, the platform may not always share information with the brand manufacturer in the agency mode, but rather depends on the competition intensity. Third, despite platform information sharing, the brand manufacturer may still choose the wholesale mode due to the positive spillover effect. This counterintuitive result occurs because the significant positive spillover effect mitigates the double marginalization effect of information sharing in the wholesale mode.