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The role of data-driven services strategy in platform competition: A system performance perspective.
Qiang Hu1,2, Jiaping Xie1,3, Guangsi Zhang1,3
1College of Business, Shanghai University of Finance and Economics, Shanghai, China.
Plos One
|January 26, 2023
Summary
Data-driven services (DDS) are key for e-commerce. Improving DDS can harm competitors but not always benefit oneself, impacting platform performance and consumer welfare.
Area of Science:
- E-commerce strategy
- Big data analytics
- Game theory applications
Background:
- Digital platforms increasingly rely on data-driven services (DDS) for competitive advantage.
- E-commerce platforms operate in self-operated and third-party modes, influencing market dynamics.
- Understanding the interplay between DDS, pricing, and platform performance is crucial.
Purpose of the Study:
- To analyze the competitive strategies of e-commerce platforms using self-operated and third-party models.
- To investigate the impact of data-driven services (DDS) and pricing decisions on platform system performance and consumer welfare.
- To determine the conditions for implementing DDS strategies and identify dominant DDS levels.
Main Methods:
- Utilized the Hotelling model to represent market competition between platforms.
- Developed optimization models based on game theory to analyze DDS and pricing strategies.
- Characterized platform system performance functions and derived equilibrium conditions.
Main Results:
- A price reduction strategy benefits the implementing platform but harms its competitor's system performance.
- Continuous DDS improvement can negatively impact competitors without guaranteeing self-benefit, illustrating a 'harming others may not benefit oneself' scenario.
- Consumer welfare exhibits an inverse relationship between platforms ('as one falls then another rises').
Conclusions:
- Self-operated platforms gain advantages in service, profit, and system performance as big data matures.
- Third-party platforms offer superior consumer welfare.
- Findings provide strategic insights for e-commerce platforms in developing data-driven operations.
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