Subject：Asymmetric Information of Product Authenticity on C2C E-Commerce Platforms: How Can Inspection Services Help?

Guest：Fang Xin, Assistant Professor, Singapore Management University

Host：Cao Yufeng, Assistant Professor, ACEM of SJTU

Time：Wednesday, April 13, 2022 14:00-15:30

Venue: Tencent Meeting

（Please send email to mliu18@sjtu.edu.cn by 12:00 April.13th for meeting number and password.） 

Abstract:

We consider product counterfeiting on a customer-to-customer platform that provides an inspection service. We develop a two-stage game-theoretical model. In the first stage, the platform designs a contract specifying commission and penalty fees. In the second stage, a seller signals his product authenticity by setting a price and a buyer decides whether to purchase it. This results in a contract design problem that governs a signaling game. We find that the effect of inspection is beyond merely detecting counterfeits. The inspection, even an imperfect one, changes the signaling game's structure and incentivizes the seller who likely has an authentic product to sell through the platform. This can only be achieved by carefully choosing the commission and penalty fees. Interestingly, a higher platform's expected profit does not imply a higher price or commission fee in equilibrium. Under some mild conditions, the optimal commission increases but the optimal penalty decreases as the platform's inspection capability improves.

Guest Bio：

Xin Fang is Assistant Professor of Operations Management and MPA Research Fellow at Lee Kong Chian School of Business, Singapore Management University. He earned his Ph.D. in Operations Management from Carnegie Mellon University in 2014, and his B.S. in Information Systems from Fudan University in 2008. Xin studies the problems related to competition and coopetition in global supply chain networks. His research applies cooperative game theory, non-cooperative game theory and the theory of social and economic networks to the areas of decentralized distribution systems, corporate social responsibility and E-Business. His work has been published in journals such as Manufacturing & Service Operations Management, Operations Research and Production and Operations Management.