Seller Promotion and Competition on Decentralized Two-Sided Platform

Purpose –This paper aims to explore the promotion decisions of heterogeneous sellers on a decentralized platform under competitive conditions and analyzes its impact on platform profit, seller revenue, buyer surplus and social welfare.Design/methodology/approach – This paper considers a Cournot model consisting of two sellers with different conversion rate and browsing cost and a platform charging commission rate. The promotion efforts of sellers can bring traffic, but also incur promotion cost for sellers. The sellers need to make the promotion decision by weighing these two effect. We also explore the equilibrium when platform charge a fixed usage fee in the extension section.Findings – We find that the seller's profit always gets better with its conversion rate increase and worse with browsing cost increase. Besides, the increase in the commission rate charged by the platform makes the seller invests less promotional efforts. Therefore, the platform needs to make a trade-off to determine an optimal rate. The result shows that the seller with both high conversion rate and browsing cost plays a greater role in generating more overall revenue. When the market favors such seller, the platform tends to charge less in order not to impair its profitability. Originality –This paper incorporates conversion rate, buyer's browsing cost, unit promotion cost, and the fee charged by the platform into the model to study sellers' promotion decisions on decentralized platforms