Pricing and service investment decisions in a dual-channel service supply chain under platform aggregation competition

Abstract

Platform aggregation has become an important organizational form in service supply chains, enabling service providers to simultaneously operate proprietary channels and participate in third-party aggregation platforms. However, while the dual-channel structure creates opportunities for market expansion, it also introduces managerial challenges related to channel competition and demand migration. To address these issues, this paper develops a game-theoretic model of a dual-channel service supply chain under platform aggregation competition to investigate joint pricing and service investment decisions. In the proposed model, a dominant service provider operates both a proprietary channel and an aggregated channel, whereas a competing provider participates only through the aggregation platform. Based on a spatial competition framework, endogenous service investment is incorporated into the decision-making process to derive the optimal pricing strategies, service investment level, and market demand allocation. The results show that service investment not only mitigates demand cannibalization between channels but also strengthens the dominant provider’s competitive pressure on rivals. Moreover, the relationship between pricing and service investment is jointly influenced by platform commission rates and users’ recognition of the aggregation platform, resulting in either strategic complementarity or strategic substitution. Furthermore, the study identifies the equilibrium boundary conditions for dual-channel coexistence and proprietary-channel dominance. The findings provide theoretical support and managerial implications for channel operations and resource allocation in platform aggregation environments.