Strategic choice of selling format under different power structures

The power structure significantly alters the dynamic interaction between supply chain members, which poses a great challenge to competing suppliers in selecting the optimal selling format. This paper investigates two suppliers’ strategic choice of selling format by considering two power structures, i.e., Supplier Stackelberg (SS) structure and E-tailer Stackelberg (RS) structure. We find that both suppliers adopt the reselling (agency) format if the commission rate is sufficiently large (small) under the RS structure. While the two suppliers are likely to adopt different formats (i.e., one adopts the reselling format and the other adopts the agency format) under the SS structure. The rationale hinges on the suppliers’ market power and its interactions with the double-marginalization effect. Additionally, we identify Pareto improvements such that the suppliers’ choices also benefit the e-tailer. Furthermore, the stronger supply chain power (i.e., possessing vertical price leadership) does not necessarily enable the supply chain member to charge a higher retail price, which depends on the selling format adopted by the two suppliers and their upstream competition intensity. Our results provide prescriptive suggestions to the suppliers for selecting the optimal selling format in competitive environments when they locate in various market positions.