P2P marketplaces and retailing in the presence of consumers' valuation uncertainty

Abstract

What is the effect of peer-to-peer (P2P) marketplaces on traditional supply chains when consumers may experience valuation uncertainty? On the one hand, P2P marketplaces can mitigate some of this uncertainty by allowing consumers to trade mismatched goods. On the other hand, P2P marketplaces impose a threat as they compete with retailers and their suppliers over consumers. We develop a two-period model that highlights the effects introduced by P2P marketplaces. 
We show that a profit-maximizing P2P marketplace benefits retailers and suppliers when the product's unit cost is sufficiently high but hurts them otherwise. The introduction of a P2P marketplace can relieve consumers from the valuation uncertainty and induces the retailer to post a higher price. However, when the unit cost is low, the platform manages to extract most, or all, of the consumers surplus, thereby directly hurting consumers, and eventually the retailer and the supplier experience lower sales in both periods relative to no platform being present. With a high unit cost the P2P marketplace is limited in its ability to extract consumer surplus, which increases the retailer sales and benefits both the retailer and the supplier. We further find that consumer surplus and social welfare are generally higher. Additionally, similar insights are derived for a frictionless P2P marketplace and we also explore the outcomes when consumers may exhibit strategic waiting.

About the presenter

Dr. Benny Mantin is an Associate Professor in the Department of Management Sciences at the University of Waterloo, Canada.  He received his Ph.D. from the University of British Columbia, and M.Sc. as well as B.Sc. from Tel-Aviv University. He is also a profession engineer. His research covers different aspects of dynamic pricing and revenue management, supply chain management, and transportation economics.

More info about Prof. Benny Mantin

About the Seminar

The KLU research seminar series is a regular meeting of PhD students, Post-Docs and professors who conduct research in the field of logistics and supply chain management. The research seminar is open to the public and we happily welcome guests.