Platform vertical mergers and acquisitions strategy with heterogeneous sellers

It is widely acknowledged that mergers and acquisitions decisions have important consequences for firms. This study examines the e-commerce platform’s vertical mergers and acquisitions strategy by incorporating product vertical differentiation within a two-stage game model developed between e-commerce platforms and sellers. The results show that, regardless of product quality, the platform always chooses to merge and acquire sellers. Furthermore, if the platform has a strong information integration capability, it is optimal for it to merge high-quality sellers; otherwise, merging low-quality sellers is more favorable. We also find that, if the platform merges and acquires the low-quality seller, it benefits both the platform and the high-quality seller. However, the results also indicate that there exists a “bottleneck interval” of integration capability, within which the platform’s profits after mergers and acquisitions decline as its integration capability improves.