Carrot-and-stick: The impact of raising platform commission rates and offering free data services on dominant brands’ sales mode choices

Abstract

As e-commerce platforms in Southeast Asia shift toward profitability, they often raise commission rates while providing sellers with free data services that offer three core functions: data mining, traffic profiling, and user profiling. Higher commission rates strengthen platform monetization, while free data services sharpen sellers' operational decisions. This common practice motivates our model construction. This paper develops a supply chain framework consisting of a single e-commerce platform and two brand suppliers that compete from asymmetric market positions. The dominant brand chooses between agency selling and reselling, whereas the weaker brand relies on an agency selling model. We construct four scenarios along two dimensions: (1) channel structure (dual agency versus hybrid mode) and (2) whether the platform adopts the ‘commission rate hikes + free data services’ strategy. Employing a complete Stackelberg game framework, we derive all equilibrium outcomes and analyze the platform's operational tactics, brand suppliers' channel preferences, and the corresponding effects on social welfare. Our findings reveal that the demand-expansion effect of free data services is the primary driver of channel structure decisions. When data service efficiency is sufficiently high, the agency channel absorbs the full incremental demand generated by free data services. Consequently, higher commission rates do not necessarily induce the dominant brand to switch to reselling.