[KSCI] Korea Science Citation Index Service

http://dx.doi.org/10.7232/iems.2010.9.2.097

On eBay's Fee Structure from a Channel Coordination Perspective

Chen, Jen-Ming (Institute of Industrial Management National Central University)
Cheng, Hung-Liang (Institute of Industrial Management National Central University)
Chien, Mei-Chen (Department of Industrial and Technology Management Vanung University)

Publication Information

Industrial Engineering and Management Systems / v.9, no.2, 2010 , pp. 97-106 More about this Journal

Abstract

Can eBay.com's fee structure coordinate the channel? It's a critical strategic problem in e-commerce operations and an interesting research hypothesis as well. eBay's fees include three parts: monthly subscription fee, insertion fee, and final value fee (i.e., a revenue sharing portion), which represent a generic form of revenue sharing fee structure between the retailer and the vendor in a supply chain. This research deals with such a channel consisting of a price-setting vendor who sells products through eBay's marketplace exclusively to the end customers. The up- and down-stream channel relationship is consignment-based revenue sharing. We use a game-theoretic approach with assumption of the retailer (i.e., eBay.com) being a Stackelberg-leader and the vendor being a follower. The Stackelberg-leader decides on the terms of revenue sharing contract (i.e., fee structure), and the follower (vendor) decides on how many units to sell and the items' selling price. This study formulates several profit-maximization models by considering the effects of the retail price on the demand function. Under such settings, we show that eBay's fee structure can improve the channel efficiency; yet it cannot coordinate the channel optimally.

Keywords

Channel Coordination; Revenue-sharing; Consignment; Wholesale-price-only; Game Theory;

Citations & Related Records

Reference

1	Yao, Z., Leung, C. H., and Lai, K. K. (2008b), Manufacturer's revenue-sharing contract and retail competition, European Journal of Operational Research, 186(2), 637-651. DOI ScienceOn
2	Koulamas, C. (2006), A newsvendor problem with revenue sharing and channel coordination, Decision Sciences, 37(1), 91-100. DOI ScienceOn
3	Lal, R. (1990), Improving channel coordination through franchising, Marketing Science, 9(4), 299-318. DOI ScienceOn
4	Li, S. and Hua, Z. (2008), A note on channel performance under consignment contract with revenue sharing, European Journal of Operational Research, 184(2), 793-796. DOI ScienceOn
5	Gerchak, Y., Cho, R. K., and Ray, S. (2006), Coordination of quantity and shelf-retention timing in the video movie rental industry, IIE Transactions, 38 (7), 525-536. DOI ScienceOn
6	Gerchak, Y. and Wang, Y. (2004), Revenue-sharing vs. wholesale-price contracts in assembly systems with random demand, Production and Operations Management, 13(1), 23-33.
7	Giannoccaro, I. and Pontrandolfo, P. (2004), Supply chain coordination by revenue sharing contracts, International Journal of Production Economics, 89 (2), 131-139. DOI ScienceOn
8	Giannoccaro, I. and Pontrandolfo, P. (2009), Negotiation of the revenue sharing contract: An agent-based systems approach, International Journal of Production Economics, 122(2), 558-566. DOI ScienceOn
9	Eliashberg, J., Swami, S., Weinberg, C. B., and Wierenga, B. (2001), Implementing and evaluating silverscreen: a marketing management support system for movie exhibitors, Interfaces, 31(3), 108-127. DOI ScienceOn
10	Foros, $\phi$ ., Hagen, K. P., and Kind, H. J. (2009), Pricedependent profit sharing as a channel coordination device, Management Science, 55(8), 1280-1291. DOI ScienceOn
11	Dana, J. D. and Spier, K. E. (2001), Revenue sharing and vertical control in the video rental industry, The Journal of Industrial Economics, 49(3), 223-245.
12	Chauhan, S. S. and Proth, J. M. (2005), Analysis of a supply chain partnership with revenue sharing, International of Journal Production Economics, 97(1), 44-51. DOI ScienceOn
13	Chen, J. M., Cheng, H. L., Wang, T. Y., and Chien, M. C. (2009), On channel coordination under revenue sharing contract: can eBay's fee structure coordinate the channel? Proceedings of the APIEMS Conference, Kitakyushu, Japan, 10-18.
14	Coughlan, A. T., Anderson, E., Stern, L. W. and El- Ansary, A. I. (2001), Marketing Channels, sixth edition, Prentic Hall, New Jersey.
15	Turcsik, R. (2002), Efficiency on consignment, Progressive Grocer, 81(2), 29-31.
16	Bellantuono, N., Giannoccaro, I., Pontrandolfo, P., and Tang C. S. (2009), The implications of joint adoption of revenue sharing and advance booking discount programs, International Journal of Production Economics, 121(2), 383-394. DOI ScienceOn
17	Bhaskaran, S. R. and Krishnan, V. (2009), Effort, revenue, and cost sharing mechanisms for collaborative new product development, Management Science, 55(7), 1152-1169. DOI ScienceOn
18	Cachon, G. P. and Lariviere, M. A. (2005), Supply chain coordination with revenue-sharing contracts: strengths and limitations, Management Science, 51(1), 30-44. DOI ScienceOn
19	Yao, Z., Leung, C. H. and Lai, K. K. (2008a), The effectiveness of revenue-sharing contract to coordinate the price-setting newsvendor products' supply chain, Supply Chain Management, 13(4), 263-271. DOI ScienceOn
20	Ru, J. and Wang, Y. (2010), Consignment contracting: who should control inventory in the supply chain, European Journal of Operational Research, 201(3), 760-769. DOI ScienceOn
21	Linh, C. T. and Hong, Y. (2009), Channel coordination through a revenue sharing contract in a two-period newsboy problem, European Journal of Operational Research, 198(3), 822-829. DOI ScienceOn
22	Van der Veen, J. A. A. and Venugopal, V. (2005), Using revenue sharing to create win-win in the video rental supply chain, Journal of the Operational Research Society, 56(7), 757-762. DOI ScienceOn
23	Wang, Y., Jiang, L., and Shen, Z. J. (2004), Channel performance under consignment contract with revenue sharing, Management Science, 50(1), 34-47. DOI ScienceOn
24	Li, S., Zhu, Z. and Huang, L. (2009), Supply chain coordination and decision making under consignment contract with revenue sharing, International Journal of Production Economics, 120(1), 88-99. DOI ScienceOn
25	Ha, A. Y. and Tong, S. (2008), Revenue sharing contracts in a supply chain with uncontractible actions, Naval Research Logistics, 55(5), 419-431. DOI ScienceOn
26	Mortimer, J. H. (2008), Vertical contracts in the video rental industry, Review of Economic Studies, 75(1), 165-199. DOI ScienceOn
27	Pasternack, B. A. (2002), Using revenue sharing to achieve channel coordination for a newsboy type inventory model. in J Geunes, P. M. Pardalos, and H. E. Romeijn, eds.: Supply Chain Management: Models, Applications, and Research Directions, Kluwer Academic Publishers, London, 117-136.