Abstract
The paper evaluates the contracting problem between a platform and a seller under information asymmetry where the seller holds private information about his/her cost for product quality. Price per product is influenced by seller’s product quality and platform’s service quality. Cost-sharing contract is more desirable as it induces a higher level of qualities and generates higher profit for the platform compared to revenue-sharing contract. The product quality and platform’s service quality vary negatively with the ad-valorem tax imposed on price of the product. We then introduce advertising in our model and observe that the level of advertising is lower under information asymmetry.
Get full access to this article
View all access options for this article.