Proprietarily or Open? Online Credit Offering Strategy for a Platform-Based Retailer

Online retail platforms are increasingly interested in offering online credit to consumers. These platforms act as resellers or marketplaces, building the reseller and agency channels. The platform may offer credit only to consumers who purchase in the reseller channel, i.e., proprietarily, or in both channels, i.e., openly. In this article, we develop a game-theoretical model to investigate how the platform's credit strategy affects the co-opetition between the platform and seller. Consumers are heterogeneous in their preferences for the purchase channel and payment mode. Online credit may bring a positive or negative credit yield rate for the platform, depending on the interest, credit risk, and return on investment. We find that the credit offering may increase both the platform and seller's prices when the credit yield rate is positive or the misfit cost is low. When the credit yield rate is negative or the misfit cost is low, proprietary credit will increase the seller's demand. Furthermore, the platform has no incentive to offer credit when the credit yield rate is negative and the misfit cost is low. Interestingly, the platform will proprietarily offer credit when the misfit cost is high, even if the credit yield rate is negative. The platform will openly offer credit when the credit yield rate is positive and the misfit cost is low. A negative (positive) credit effect to consumers will increases (decreases) the platform's incentive to offer credit openly. A correlation between the purchase channel and payment mode reduces the platform's incentive to offer credit.