Information sharing and private‐label production outsourcing strategies in platform markets

Abstract Recently, a growing number of e‐commerce platforms have launched private labels (PLs) to compete with national brands (NBs). However, whether to outsource PL production to NB manufacturers or third‐party manufacturers has still puzzled platforms (especially when the platform possesses private demand information and decides whether to share this information with other members). In this paper, we utilize a game‐theoretical model to investigate the interactions between information sharing and production outsourcing strategies. We show that the information sharing strategy for the platform is quite different under the two outsourcing strategies. Specifically, when outsourcing to an NB manufacturer, the platform chooses not to share her information if the commission rate is low; whereas when outsourcing to a third‐party manufacturer, the platform always prefers to share her information only with the NB manufacturer. Interestingly, in the latter case, both the NB manufacturer and the third‐party manufacturer prefer the platform to share information with both rather than with only one party. Furthermore, we derive the equilibrium result of the whole game and suggest that when the commission rate is high and the information accuracy is small, the platform should employ the NB manufacturer and share information with this manufacturer; when the commission rate is medium and the information accuracy is small, the platform should select the NB manufacturer but withhold the information; otherwise, she should outsource to the third‐party manufacturer but share her information only with the NB manufacturer. In addition, the extended model examines the impacts of the game sequence and shows that sharing information first encourages the platform to outsource PL production to the NB manufacturer.