The interplay between charitable donation strategies and sales mode selection in the platform

Abstract

Motivated by the emergence of offline and online donations, this paper explores the interplay between charitable donations and strategic choice of sales mode in a philanthropic supply chain consisting of a manufacturer and a platform. We consider two donation strategies, offline donations and both offline and online donations that are traceable by blockchain technology, and two business models, i.e., reselling sales mode and agency sales mode. Donations by the manufacturer are used to boost its charitable image, which in turn affects positively the demand. As such image can only be built over time, we adopt a differential game formalism that captures both the strategic interactions between the two players and the dynamic nature of the problem. We characterize and compare the equilibrium strategies and outcomes for different choices of selling mode and donation option. Our findings can be summarized as follows. First, we obtain that only under some conditions that online donations enhance the charitable image, members’ profits, consumer surplus, and social welfare. Second, regardless of the sales mode, the conditions for the platform to adopt online donations are the most stringent, and the conditions for the enhancement of the charitable image are the most lenient. Third, the implementation of online donations does not have much impact on the Pareto regions of the agency mode but has a much greater impact on the Pareto regions of the reselling mode, especially for medium and large online donation amounts. These changes hinge on the trade-offs for members between online and offline donations.