To Discount or Not to Discount: A Game-Theoretic Analysis of the Pricing and Survival Dilemma in Luxury E-commerce

Selling conspicuous products online is challenging for both brands (brands) and third- party e-commerce platforms (platforms). For brands, the trade-off between offering online discount and maintaining high-end brand image gives no easy answer, which leads to wide application of Minimum Advertised Pricing (MAP) policy to restrain their retailers. For platforms, lack of authority in controlling prices leaves them in a struggling-to-survive situation. Platforms could resort to Platform Discount promotion only when brands agree to participate. This interaction between MAP policy and platform discount, even though it is crucial for conspicuous brands and platforms, has not been studied in the current literature. To fill this gap, we analyze interaction between the brands and third-party e-commerce platforms using a game-theoretic model.