Broad or niche? decision-making options based on e-commerce platforms

Abstract

Previous studies believed that reducing search costs would make niches better catered to consumers, and therefore, more sellers would switch to producing niches, thus leading to the long tail effect. However, although E-commerce and related technologies have brought search costs down enough, plenty of broad products are still on the market. To address this, by introducing platform decision, this study constructs a three-way game model to analyze the proportion of broad products on the platform. The results show that when search costs are sufficiently small, the proportion of niches will decrease with the further reduction of search costs, which is inconsistent with the long tail effect. By adding platform decision, this study summarizes the relationship between search costs and the long tail effect more comprehensively and explains that a large number of broad products on the market is deliberately arranged by the platform. In addition, this article studied the extended scenario with a recommendation mechanism to supplement the basic model in which consumers search randomly. The study found that the findings in the basic model were strengthened.