FMCG supply-chain coordination under network externality: decision modes and cost-sharing mechanisms

Purpose This study aims to examine how network externality affects coordination in a fast-moving consumer goods (FMCG) supply chain in which a supplier undertakes product innovation and a retail platform controls advertising and access. It evaluates stationary outcomes under unilateral and bilateral cost sharing within a commission-based platform channel. Design/methodology/approach An infinite-horizon differential game is developed with product quality and goodwill as state variables. Operational decisions are represented by interior stationary candidates implied by open-loop necessary conditions. In the cost-sharing scenarios, commission-indexed stationary response-based rules are derived by substituting the recipient's stationary effort response into the financing party's current-value Hamiltonian. The analysis compares stationary operating values, sharing-rate interiority, profit-rate differences, and numerical patterns. The case analysis illustrates how supplier product development and platform promotion jointly support goodwill formation and market expansion. Findings Within maintained existence and demand-interiority conditions, the centralized stationary candidate yields the highest research and development (R&D) effort, advertising effort, product quality, goodwill, and demand. Under the response-based rules, a low commission rate supports an interior supplier contribution to platform advertising, while an intermediate rate supports interior contributions to both advertising and R&D. Network externality magnifies demand effects arising from governance-induced goodwill differences. Across examined admissible ranges, member-level stationary-profit-rate differences increase with network externality. Originality/value This study integrates product-quality evolution, goodwill accumulation, consumer-side network externality, and commission-based platform governance within a dynamic framework. It separates advertising-side from R&D-side coordination and shows that bilateral sharing is not merely a stronger subsidy, but a distinct mechanism whose relevance depends on commission conditions and the source of goodwill formation across FMCG categories.

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Publication Details

Journal
Industrial Management & Data Systems
Published
2026-09-17
DOI
https://doi.org/10.1108/imds-09-2025-1192
Primary Topic
Digital Platforms and Economics
Type
article
Field-Weighted Citation Impact
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article

FMCG supply-chain coordination under network externality: decision modes and cost-sharing mechanisms

Yifei Hao, Bai Yang, Jichuan Zheng, Nan Pan et al.
Industrial Management & Data Systems
Digital Platforms and Economics
article

FMCG supply-chain coordination under network externality: decision modes and cost-sharing mechanisms

Yifei Hao, Bai Yang, Jichuan Zheng, Nan Pan, Shuang Chen
article en

Abstract

Purpose This study aims to examine how network externality affects coordination in a fast-moving consumer goods (FMCG) supply chain in which a supplier undertakes product innovation and a retail platform controls advertising and access. It evaluates stationary outcomes under unilateral and bilateral cost sharing within a commission-based platform channel. Design/methodology/approach An infinite-horizon differential game is developed with product quality and goodwill as state variables. Operational decisions are represented by interior stationary candidates implied by open-loop necessary conditions. In the cost-sharing scenarios, commission-indexed stationary response-based rules are derived by substituting the recipient's stationary effort response into the financing party's current-value Hamiltonian. The analysis compares stationary operating values, sharing-rate interiority, profit-rate differences, and numerical patterns. The case analysis illustrates how supplier product development and platform promotion jointly support goodwill formation and market expansion. Findings Within maintained existence and demand-interiority conditions, the centralized stationary candidate yields the highest research and development (R&D) effort, advertising effort, product quality, goodwill, and demand. Under the response-based rules, a low commission rate supports an interior supplier contribution to platform advertising, while an intermediate rate supports interior contributions to both advertising and R&D. Network externality magnifies demand effects arising from governance-induced goodwill differences. Across examined admissible ranges, member-level stationary-profit-rate differences increase with network externality. Originality/value This study integrates product-quality evolution, goodwill accumulation, consumer-side network externality, and commission-based platform governance within a dynamic framework. It separates advertising-side from R&D-side coordination and shows that bilateral sharing is not merely a stronger subsidy, but a distinct mechanism whose relevance depends on commission conditions and the source of goodwill formation across FMCG categories.

Industrial Management & Data Systems
Chongqing Technology and Business University (CN)
Industry, innovation and infrastructure
Openalex Percentile: Top 8%
Digital Platforms and Economics
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