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Open Access

Infra-Marginal Analysis Model for Provision Mode Selection for E-commerce Services

Xiao Yu, Yueting Chai(), Yi Liu, Hongbo Sun

National Engineering Laboratory for E-Commerce Technology, Department of Automation, Tsinghua University, Beijing 100084, China

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Abstract

E-commerce has grown extraordinarily since the emergence of the internet, and many types of services are employed to accelerate this process. Service quality and productivity are two critical indicators to evaluate the competitiveness of e-commerce companies. Deciding which provision mode of e-commerce services (buy, sell, or self-provide) to adopt is a key operational strategy issue. This paper investigates the conditions and limitations of e-commerce services’ optimal supply modes, and proposes a cost oriented infra-marginal model where service demand is considered an exogenous variable due to its non-elastic and unprofitable characteristics. By analyzing the main impact factors of this model, this paper infers provision mode selection strategies, which are determined by four factors: transaction cost, service price, service demand, and competitive advantages. Decision trees are derived from these strategies to help e-commerce companies make appropriate decisions. Finally, the proposed model’s feasibility is verified by two case studies.

Keywords

e-commerce services provision mode selection e-commerce infra-marginal analysis cost minimizing

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Tsinghua Science and Technology

Volume 19 Issue 2,
April 2014

Pages 174-183

DOI: 10.1109/TST.2014.6787371

Cite this article:

Yu X, Chai Y, Liu Y, et al. Infra-Marginal Analysis Model for Provision Mode Selection for E-commerce Services. Tsinghua Science and Technology, 2014, 19(2): 174-183. https://doi.org/10.1109/TST.2014.6787371

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113745N-2914-02-174.T001Table 1Five modes of the single service cost model.

Mode	$x_{i}$	$x_{i}^{d}$	$x_{i}^{s}$	$C_{i}$
PB (Provide & Buy)	$+$	$+$	0	$f_{i} (D_{i} - k x_{i}^{d}) + p x_{i}^{d}$
PS (Provide & Sell)	$+$	0	$+$	$f_{i} (D_{i} + x_{i}^{s}) - p x_{i}^{s}$
Autarky	$+$	0	0	$f_{i} (D_{i})$
BO (Buy Only)	0	$+$	0	$p x_{i}^{d}$
SO (Sell Only)	0	0	$+$	$f_{i} (x_{i}^{s}) - p x_{i}^{s}$

Notes: Symbol "+" represents positive value, "0" is zero.

113745N-2914-02-174.T002Table 2Optimum decision tree for constant and identical marginal costs.

Conditions	$φ < a$		$a < φ$
	$p ⩽ a$	$p > a$	$p ⩽ a$	$a < p < φ$		$p ⩾ φ$
$x_{i}^{s} ⩽ τ$				$x_{i}^{s} > τ$
Optimal mode	Autarky	PS	Autarky	BO	PS	PS

Notes: $τ = \frac{a - p / k}{p - a} D_{i} + \frac{b_{i}}{p - a}$ , $φ = k (a + b_{i} / D_{i})$ .

113745N-2914-02-174.T003Table 3Optimum decision tree for increasing marginal costs.

Conditions	$p < k (a_{i} D_{i}^{α} + b_{i}) / D_{i}$					$p ⩾ k (a_{i} D_{i}^{α} + b_{i}) / D_{i}$
	$p < k a_{i} α D_{i}^{α - 1}$		$k a_{i} α D_{i}^{α - 1} ⩽ p$ and $p ⩽ a_{i} α D_{i}^{α - 1}$	$p > a_{i} α D_{i}^{α - 1}$		$p < k a_{i} α D_{i}^{α - 1}$	$k a_{i} α D_{i}^{α - 1} ⩽ p$ and $p ⩽ a_{i} α D_{i}^{α - 1}$	$p > a_{i} α D_{i}^{α - 1}$
	$p > μ$	$p ⩽ μ$		$θ > 0$	$θ ⩽ 0$
Optimal mode	PB	BO			PS	PB	Autarky	PS

Notes: $β = \frac{1 - α}{α} {(\frac{1}{α})}^{\frac{1}{α - 1}}$ , $γ = α^{\frac{1}{α}} {(\frac{α}{α - 1})}^{\frac{α - 1}{α}}$ , $θ = \frac{β}{a_{i}^{\frac{1}{α - 1}}} p^{\frac{α}{α - 1}} + \frac{k - 1}{k} p D_{i} + b_{i}$ , and $μ = k a_{i}^{\frac{1}{α}} b_{i}^{\frac{α - 1}{α}} γ$ .

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