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Research Article

How and Who Should Determine Sales Commission and Product Price on Online Shopping Websites?

Park, Haecheol1 · Hyun, Jiyun1

1 Chung-Ang University

Published: January 2019 · Vol. 48 No. 6 · pp. 1625-1641

DOI: https://doi.org/10.17287/kmr.2019.48.6.1625

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Abstract

It is common that the online shopping websites usually maintain a different retail pricing scheme for products they sell from their suppliers, because the online shopping websites and their suppliers have different incentives each other for their retail pricing mechanism which is based on the seller fee schedules between them. This research figures out some important facts which are able to help in understanding the reasons for the matter and finding resolutions for such a conflict as follows. First, all players in the supply-chain should coordinate to maximize their total profit through the whole supply-chain applying one of the two optimal referral fee schedules which are mutually exclusive each other depending on their transactional environment. Those referral fee schedules appear to be dependent on some ratios which consist of the weighted averages of each player’s marginal costs. We suggest the explicit and closed form solutions of such ratios applying the first order condition to their profit function confirming the optimality of them. Second, we explain the reason why it is rational for a player whose marginal costs are higher than the other’s to steer the retail pricing scheme for their products to maximize the total profit through their whole supply-chain. Therefore it is reasonable for the suppliers to set their retail prices of their products if their marginal costs are higher than their online shopping website’s, which happens to be common in the real world. On the contrary, if the marginal costs of the suppliers are lower than their online shopping website’s, then the online shopping websites should determine the retail prices of the products following their own incentive scheme. Also we confirm that one of the results by the past research with only two competing products still holds true in more generalized multiple product cases. The result insists that profit realization for each player in the supply-chain needs to adopt a two-part tariff scheme adjusting their account fee schedules to reflect their bargaining powers between them. Finally, it is possible to maximize the profit through their whole supply-chain only if the online shopping website constructs its product groups which are supposed to apply the same referral fee schedule, applying the criterion of marginal cost ratio similarity rather than its product similarity.
Keywords: 전체공급사슬온라인 쇼핑 웹사이트이중이익부과최적소매가격변동수수료정액수수료한계비용비율이부가격제