Promote or prevent manufacturer encroachment? The strategic role of selling format under asymmetric demand information

Conventional wisdom demonstrates that the retailer sharing information voluntarily can prevent encroachment (i.e., information strategy) under the reselling agreement. Considering the prevailing emerging agency selling agreement, we reexamine the effectiveness of the platform’s information strategy when the manufacturer and platform jointly participate in selling format decisions, and further analyze the strategic role of selling format in preventing encroachment. We show that adjusting selling format decision (i.e., sales strategy) can also be an anti-encroachment tool which may be even better than information strategy for the platform. Interestingly, adopting sales strategy and information strategy synthetically (i.e., synthetical strategy) may produce a synergy area to prevent encroachment, outperforming the two strategies used alone. Surprisingly, selling format can also serve as a strategic tool for the manufacturer to promote encroachment. Specifically, if the manufacturer changes from reselling to agency selling, information strategy’s anti-encroachment effectiveness may be eliminated, thus encouraging encroachment. Moreover, switching to agency selling may induce the platform to change information sharing decision, resulting in promoting encroachment.