Game-theoretic analysis of financing problems in online operations

  • Dianyao KANG

Student thesis: PhD Thesis (Lingnan)

Abstract

Collaboration between banks and online platforms for financial services can help small- and medium-sized enterprises (SMEs) transform their actual transaction data into E-commerce credit, o§ering innovative solutions to their financing challenges. We consider an online system involving a bank, a platform, and a retailer who serves price-sensitive customers on the platform. The retailer receives a loan from the bank and pays a loan interest which is shared by the bank and the platform according to their negotiated allocation ratio. We examine two categories of scenarios to identify the optimal decisions and profit levels for the three firms involved in the system.

In Category 1, the platform imposes a commission fee on the retailer, who subsequently makes a retail pricing decision. We analyze four di§erent scenarios in accordance with (i) whether the interest rate and commission fee rate are determined simultaneously or sequentially and (ii) whether the platform independently makes the commission fee rate decision or bargains over the rate with the retailer. Our findings indicate that partnering with a relatively small bank can benefit the platform the most, whereas the bank can gain the highest profit from cooperating with a platform with similar market power. When the bank and the platform have equal power, the retailer can enjoy the highest profit. Moreover, the retailer’s and the bank’s profits are highest if the bank and the platform play the simultaneous-move game in which the platform and the retailer negotiate the commission fee rate. Although an increase in the platform’s referral fee rate decreases the retail price, the interest rate, and the interest allocation to the platform, it can raise the platform’s and the bank’s profits.

Within the second category, we follow the common practice of bargaining over the interest allocation ratio between the bank and the platform in the first stage as a precondition for cooperation. We also examine the scenarios wherein the bank determines the interest rate before negotiating interest allocation with the platform. Our comparison analysis reveals a counter-intuitive finding wherein the bank and the platform can achieve greater profitability through interest allocation negotiations following the interest rate determination.
Date of Award20 Jul 2023
Original languageEnglish
Awarding Institution
  • Lingnan University
SupervisorMingming LENG (Supervisor) & Li Ping LIANG (Co-supervisor)

Keywords

  • Service supply chain
  • game theory
  • decision sequence
  • financing

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