Transportation Research Part E 128 (2019) 115–131

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Transportation Research Part E

journal homepage: www.elsevier.com/locate/tre

Platform-led green advertising: Promote the best or promote by

T
performance
Shaofu Dua, Lei Wanga, Li Hub, , Yangguang Zhuc
⁎

a
School of Management, University of Science and Technology of China, Hefei, Anhui, PR China
b
School of International Economics and Trade, Nanjing University of Finance and Economics, Nanjing, Jiangsu, PR China
c
School of Economics, Hefei University of Technology, Hefei, Anhui, PR China

ARTICLE INFO ABSTRACT

Keywords: With the prevalence of platform economics and consumer green awareness, platform-led green
Green consumption advertising becomes an emerging issue in practice. We investigate this issue by simultaneously
Platform operations considering a product’s green performance and consumer’s green preference. Two strategies
Green advertising discussed systematically with Stackelberg models: Promote by Performance and Promote the
Environmental preference
Best. The results demonstrate the value of green advertising from both economic and environ-
mental perspectives. The platform can make more profit using the Promote the Best strategy
rather than the Promote by Performance strategy, although the former requires more investment.
The related boundary and optimal decisions are identified and analyzed.

1. Introduction

Platform-based markets have become increasingly prevalent, already occupying a large share of the economy and still growing
rapidly (Kapoor and Agarwal, 2017; Zhu and Liu, 2018). With the continuous deepening of industrial integration, the types of
platforms are becoming increasingly abundant and the scope of industrial integration is becoming wider. Platforms are either a
virtual or real trading venue, providing access to and supporting interactions among multiple participants. They can facilitate
transactions between two or more sides and between supply and demand, while charging fees to earn revenue. The rise of the
platform economy has brought great convenience and vitality to our lives and has led to the rise of famous companies, such as
Amazon, eBay, and IKEA. According to the Accenture 2017 Digital Economy Development Report, as early as 2015, the world’s 15
largest listed platform companies had a total market capitalization of US $2.6 trillion. From the Ministry of Commerce 2017 China
Retail Industry Development Report, the volume of online retail transactions via third-party platforms in China reached 516 million
Yuan in 2016, a 26.2% increase over 2015, accounting for 12.6% of the total retail consumer goods sales. Platform-based enterprises,
such as Amazon and Taobao, are becoming increasingly powerful, which has raised a series of new questions for the traditional
supply chain management.
In recent decades, environmental problems have become an increasing concern for the general public as well as academia around
the world (Zhou and Wen, 2019). The public has debated the relationship between economic growth and the environment, and many
emerging countries, such as China and India, face serious environmental deterioration (Jakob and Edenhofer, 2014). Air pollution
was, until recently, not a large concern to the public; however, since 2013, most big cities in China are shrouded by a thick haze every
winter (Du et al., 2016). In recent years, this issue has received increasing attention from governments, companies, and consumers.

⁎
Corresponding author at: School of International Economics and Trade, Nanjing University of Finance and Economics, Nanjing 210023, PR
China.
E-mail address: huli@ustc.edu.cn (L. Hu).

https://doi.org/10.1016/j.tre.2019.05.019
Received 28 January 2019; Received in revised form 31 May 2019; Accepted 31 May 2019
1366-5545/ © 2019 Elsevier Ltd. All rights reserved.
S. Du, et al. Transportation Research Part E 128 (2019) 115–131

The trend of green product development is pulled by the consumers, spurred by government regulations, and implemented by
industries (Chen, 2001). The consumers’ environmental awareness plays a significant role in pushing and maintaining the sustain-
ability of a green supply chain, indicating that a critical market-driven factor facilitates this sustainability. Many empirical research
efforts show that consumers are willing to pay a premium for environment-friendly products (Bull, 2012). Today, green product
purchases are increasingly popular among the public. According to an Accenture global survey, more than 80% of interviewees
consider a product’s environmental performance when making a purchasing decision (Agrawal et al., 2012). In other words, the green
quality of products can bring certain added value and competitiveness, and in many cases, they can obtain more market share
(Conrad, 2005; Lu et al., 2007; Kumar et al., 2019). The consumers’ actual green purchasing behavior is associated with their
knowledge of the product’s environmental performance, which is influenced by green marketing efforts (Hong and Guo, 2019).
Green marketing is regarded as an effective tool for turning consumers’ green awareness into actual purchasing behavior (Rahbar
and Abdul Wahid, 2011). Many successful companies, such as Huawei, P&G, and Siemens, have insisted on environment protection
and sustainable development as their brand orientation (Biswas et al., 2018). One of the largest retailers, Wal-Mart, is a typical
example of companies that embed suitability strategies in their business and adopt green marketing to achieve business success (Hong
and Guo, 2019). Wal-Mart has increased its investment in energy-saving products, improving the efficiency of most energy-intensive
products by 25% (Dai et al., 2017).
Compare to the green marketing of traditional companies, more platform enterprises are actively promoting sustainable pro-
duction and consumption and trying to lead the new wave of green upgrades. As a powerful supply chain leader, platforms could
effectively influence the green performance of upstream companies. For example, to promote the rapid growth of green brands on its
platform, JD.com provides a convenient and efficient channel for green product circulation. In the first half of 2017, its green brand
growth rate rose to 16.1%. Zhao Ping, director of the China Council for the Promotion of International Trade, believes that e-
commerce companies paying attention to green consumption would have special significance for the country’s green development
strategy because e-commerce’s influence on the upstream industry and consumers is increasing day by day. As green consumption
becomes a trend, green branding will become an important long-term strategy for enterprise development. Environmental protection
has been regarded as a social responsibility and brand orientation (Du et al., 2017). For example, Macalline, the largest furniture
platform operator in China, has a green home strategy and is trying to push more than 2000 furniture brands to achieve an industry-
level green upgrade. Through cooperation with the China Quality Assurance Committee, eco-labels will cover all products sold on the
platform and a strict green ranking will be published every year. Macalline will allocate many green advertising resources, such as
billboards, trade shows, and other platform-led promotion activities, to recommend green products based on their green ranking,
which has a significant impact on market competition. To join the trend of green consumption, in 2016, Taobao launched a green
parcel zone to display green icons for vendors who have the highest green rating in each product category, increasing their exposure
and bringing huge customer flow to those vendors.
We study a two-echelon supply chain, considering an industry with two manufacturers competing in a common platform market.
The two manufacturers produce goods with homogeneous functional attributes but different environmental performance to satisfy
environmentally conscious consumption, and they make price decisions to maximize their profit. The platform adopts specific green
advertising strategy to promote the products to consumers, such as allocating billboards, trade shows, and other platform-led pro-
motion activities for the green products of the two manufacturers. The platform decides its green advertising investment to maximize
its profit. After communicating with platform companies, including JD.com and Macalline, we found that the platform market’s
common green advertising strategies consist of two patterns: Promote by Performance (PP) and Promote the Best (PB). PP means the
platform will strictly align each product’s green advertising effort to their environmental performance. The platform regards the
products’ green level as the indicator that decides the advertising investment. The PB strategy is similar to winner-takes-all and means
the platform will integrate the green advertising effort to invest only in the best environmentally performing product. Consider the
examples we proposed in the previous paragraph. The allocation of different advertising resources to different green products and
recommending of green products based on their green ranking by Macalline can be seen as Promote by Performance strategy. The
green brands in JD.com and the green parcel zone launched by Taobao can be regarded as features of a Promote the Best strategy.
We contribute to investigating the challenge of choosing a platform-led advertising strategy that simultaneously considers pro-
ducts’ green performance and consumers’ green preference. In addition, despite a great deal of research on green marketing and
platform mode over the past several years, there has been very little research intended to integrate these two areas. We adopt a
Stackelberg game to present the relationship in a platform-led green advertising system. The results support supply chain player
decisions in each strategy: how to determine their retail price and how much the platform decides to invest in green advertising. The
analytical results show the value of green advertising from both economic and environmental perspectives. The platform can be more
profitable using PB strategy than using PP strategy, although PB strategy requires more advertising investment. A greener manu-
facturer will benefit from green advertising strategies, while an inferior one can adopt a green overtaking strategy to eliminate the
disadvantage when there is a relatively low overtaking cost. The supply chain achieves the best environmental performance by using
PB, and if the inferior manufacturer chooses to perform a green upgrade, it is possible to achieve a continuous green upgrade at the
industry level.
The rest of this paper is organized as follows. Section 2 reviews the related research. Section 3 provides our problem char-
acteristics and notation. We analyze the optimal decisions under the two strategies and derived some corollaries in Section 4. Section
5 systematically compares and discusses the results in different cases. Then, an extension model is developed in Section 6. In Section
7, several numerical examples are provided to support our propositions and corollaries. We conclude and offer directions for future
research in Section 8.

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2. Literature review

There are two streams of research closely related to this study: advertising and sustainable supply chain management. We review
these streams of related studies and highlight the differences in our research.
The first stream of related studies mainly focuses on advertising in supply chains. The most common study topic is vertical
cooperative advertising, which is an agreement between manufacturers and retailers. Manufacturers will share a certain proportion of
the retailers advertising expenditure because retailers usually have better information on local market conditions. Such information is
useful when designing a plan for local promotional activities (Jørgensen and Zaccour, 2014). Jørgensen et al. (2001) used the Nash
game and Stackelberg game to study dynamic cooperative advertising and compared the two results. Channel competition has also
been considered in previous cooperative advertising studies. Liu et al. (2014) investigated cooperative advertising concerning
competing manufacturers and retailers. Their research concluded that cooperative advertising might not be profitable for competing
retailers because a higher price will decrease the advertising effect. In recent years, researchers have increasingly simultaneously
studied cooperative advertising and pricing decisions. Most researchers assume that demand is increasing in advertising and de-
creasing in price. Chioveanu (2008) investigated the joint effects on pricing and advertising and drew the conclusion that advertising
would cause a higher or lower sale price. Xie and Wei (2009) studied optimal cooperative advertising strategies and found that
cooperative advertising can gain more channel profit than non-cooperative advertising. With the dramatical development of plat-
form-based markets, platforms gradually have more power to influence the decision-making of the whole supply chain while tra-
ditional supply chains are generally dominated by upstream manufacturers. This current paper studies the advertising problem with a
platform-led supply chain.
Some works try to optimize the advertising effect. Sinha and Zoltners (2001) studied resource allocation of 50 companies and
found that optimizing allocation would improve company profit by 4.5%. Gupta and Steenburgh (2008) offered a framework for
allocating advertising resources. Albuquerque et al. (2012) compared four types of marketing activities, namely, price promotions,
firm online activities, content creator referrals, and public relations effort, and advised on allocating resources in a two-sided market.
Advertising budget allocation is always a complex and important problem in this field. Chiu et al. (2018) investigated this issue and
the optimal customer portfolios problem under a mean-variance (MV) framework in the luxury fashion industry. They found that
diversification of customer portfolio does not always lead to a smaller variance in the presence of social influence, a result which is
counterintuitive. The way our study differs from previous literature is that consumer green awareness is involved in our research and
we investigate the different promotion strategies under a platform-led supply chain structure.
Green advertising is different from traditional advertising. With the increased concern about environmental problems and con-
sumers becoming increasingly environmentally conscious, green advertising is based on the concept of green products and green
consumption, and it promotes the concept of green consumption of ecological protection (Zinkhan and Carlson, 1995). Many en-
terprises regard environmentally friendly features and attributes as a persuasive selling point (Atkinson and Rosenthal, 2014). Green
advertising plays a significant role in increasing public awareness of ecological issues and can increase the demand for green products
(Easterling et al., 1996). Many companies are paying more attention to improving the green performance of products with the
ultimate goal of improving product competitiveness and realizing the potential benefits from promoting their products as green
(Hartmann and Apaolaza-Ibáñez, 2009). Eco-labels are certification marks or seals of approval to verify the environmental qualities
of a certain product to consumers (Atkinson and Rosenthal, 2014). The eco-label is one of the significant marketing tools that many
marketers adopt to promote green products (Rahbar and Abdul Wahid, 2011). Rahbar and Abdul Wahid (2011) found that eco-labels
and eco-branding can influence the customers’ purchase behavior because of its positive public image. Despite the many studies just
mentioned above, only rarely do studies consider green advertising in operation management (OM). In this paper, we incorporate
green advertising into platform operations and investigate the optimal promotion strategy of the platform. On the demand side, green
preference and platform market effort are considered in consumers’ utility function.
The second stream of research is sustainable supply chain management that considers consumer environmental awareness. A
sustainable supply chain is one that is environmentally friendly, socially responsible, and economically sustainable (Choi and Cheng,
2015). The report from United Nations Office for Disaster Risk Reduction showed that between 1998 and 2017, a total of 7255 major
disaster events were recorded worldwide, 91% of which were climate-related (UNISDR, 2018). With the gradual seriousness of
climate problems, sustainable supply chain management has become an important strategy for enterprises to undertake social re-
sponsibility. The consumers’ actual green purchasing behavior is associated with their knowledge of the products’ environmental
performance, and, therefore, green marketing is regarded as an effective tool for turning consumer green awareness into actual
purchasing behavior (Hong and Guo, 2019; Rahbar and Abdul Wahid, 2011).
Benjaafar et al. (2013) developed the pioneering work of incorporating environmental factors into supply chain management.
They discussed procurement, production, and inventory decisions under different low-carbon policies and found that supply chain
collaboration and coordination would significantly reduce carbon emissions. Du et al. (2017) expanded from studying low-carbon
efforts from manufacturers to the supply chain perspective. They game-theoretically analyzed low-carbon effort decisions by both the
manufacturer and retailer. In addition, they developed a PDS-like (price-discount sharing) contract to achieve channel coordination.
Those authors also concluded that the supply chain environmental performance would increase in consumers’ environmental
awareness. Consumer environmental awareness is a critical market-driven factor that can facilitate green product development and
consumption (Hong et al., 2018). There are many studies of consumer environment preference in the supply chain literature. Chitra
(2007) showed that the demand for green products is increasing as consumers become more concerned about eco-friendliness.
Roheim et al. (2011) investigated whether consumers are actually willing to pay a premium for green products; according to their
regression results, consumers are paying a 14.2% premium for eco-labeled products. Liu et al. (2012) studied the impact of consumer

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environmental awareness on supply chain members and found that with increasing consumer awareness, environmentally friendly
retailers and manufacturers will be more profitable. Conrad (2005) investigated the market implications by proposing a spatial
duopoly model and revealed the impact of consumer environmental awareness on price, product characteristics, and market share.
Our paper differs along two dimensions. First, we study a new green advertising problem dominated by a platform, which differs
from the traditional green supply chain. The platform incorporates the product’s green level into its advertising decisions catering to
the increased environmental preference of consumers. Second, we compare two specific platform-led green advertising strategies to
elucidate the mechanism of platform green marketing from an operations perspective.

3. Problem characteristics and notation

Consider an industry with two manufacturers competing in a common platform market. Their two products with homogeneous
function but different environmental performance will carve up the market. To simplify without losing generality, this paper dis-
cussed a duopoly market with two manufacturers although, in real-world scenarios, there are multiple manufacturers in the industry.
We denote ei as the green level of product i(i = 1, 2) , while ci is the corresponding green cost of a unit product that is invested in
green-related processing. Here, we assume that the traditional production cost is zero and the environmental performance of product
1 is better than that of product 2 (i.e., e1 > e2 ; accordingly, c1 > c2 ). We use superior manufacturer and inferior manufacturer to
denote the advantageous position and disadvantageous position of manufacturer 1 and manufacturer 2 in green performance. The
platform as a marketplace will charge these manufacturers a certain proportion (denoted by ) of sales; is an exogenous variable in
our research. As a leader, the platform decides the green advertising investment, after each manufacturer will decide its retail price pi
(i = 1 or 2) separately.
Consumers are environmentally aware, so they are willing to pay more for an environmentally friendly product. A Hotelling
model is adopted to characterize consumer choice, in which we depict environmental preference by differentiating the consumer’s
cost-sensitive factor. The better the product’s environmental performance, the less sensitive consumers would be to the travel cost.
Let t1 and t2 refer to the consumer’s travel cost sensitivity factor to the products with high and low green level, respectively, so t1 < t2 .
Here, we simplify the consumer’s travel cost sensitivity factor by having it be an exogenous factor, and we assume consumers can
identify each product’s green level. This setting can be interpreted as consumers having a high tolerance for distance due to the higher
green level of the product. A similar extension of the traditional Hotelling model can be seen in many classic literature works (Syam
and Kumar, 2006; Loginova, 2010).
Formally, let x [0, 1] represent the location of a consumer by denoting the travel distance to product 1, meanwhile, the travel
distance to product 2 is represented by 1 x . This uniform distribution is standard in the literature on product differentiation
employing the Hotelling (1929) framework because of its analytical tractability (Syam and Kumar, 2006; Geylani et al., 2007). In this
model, the travel distance can be regarded as the psychologically perceived distance to the product, which reflects the consumer’s
familiarity with and acceptance of each product.
Let k = k1 + k2 represent the total advertising investment of the platform, where ki (i = 1,2) denotes the platform’s advertising
investment on behalf of product i. We use superscript PP and PB to distinguish parameters in Promote by Performance mode and
Promote the Best mode respectively, and the essential difference between two strategies is the allocation rule of platform’s advertising
investment. In keeping with standard notions of advertising, the effect of green advertising on the increment of consumer utility is
described as s ki , which is chosen to exhibit decreasing returns (Agrawal, 1996; Kim and Staelin, 1999; Geylani et al., 2007). To
incorporate this green advertising factor into the model, each consumer’s utility from purchasing product i can be uniformly ex-
pressed as:

Ui = V + s ki pi ti x i ; i = 1, 2.

Here, v > 0 is gross benefit from consuming one product and is set to the same amount due to functional homogeneity of these two
products. In this paper, we assume v is sufficiently large to ensure Ui > 0, (i = 1, 2) , which is widely adopted in Hotelling Framework
research (Syam and Kumar, 2006; Geylani et al., 2007.
The parameter s denotes the consumers’ sensitivity toward green advertising. To guarantee that platform obtains an interior
9(t + t )
solution, s should satisfy s 2 < 12 2 . This condition indicates that s should not be too large, which means the platform cannot
advertise so much that all consumers are directed to just one product (Geylani et al., 2007). This is consistent with the fact that
platforms would not endlessly increase advertising to pursue consumption guidance.
The decision variables and the model parameters are summarized in Table 1.

4. Analytical models

In this section, game-theoretical methods are developed to investigate the platform’s optimal green advertising strategy concerned
the green performance of upstream manufacturers. Promote by Performance (PP) is analyzed first, and we compare PP to the
benchmark scenario that the platform does not adopt green advertising. Then we analyze the strategy of Promote the Best (PB). The
essential difference between two strategies is the allocation rule of platform’s advertising investment. We investigate the supply chain
decisions under each case by using the Stackelberg game paradigm to reflect the platform’ leadership role in supply chain. As a
leader, the platform decides the green advertising investment, after which the two manufacturers decide their retail price pi (i = 1 or
2) separately.

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Table 1
Decision variables and model parameters.
Platform’s decision variables
k Platform’s total green advertising investment;

Manufacturers’ decision variables

pi Product i price, i = 1, 2 ;
Model parameters
ei Product i green performance, i = 1, 2 ;
ci Cost of green-related processing per product i, i = 1, 2 ;
Services fee that platform charges to manufacturers;
ti Consumer’s travel cost sensitivity factor to the product i, i = 1, 2 ;
xi Location of a consumer denoting the travel distance to product 1;
s Consumers’ sensitivity toward green advertising;
V Consumers’ gross benefit from consuming one product;
i Profit of manufacturer i, i = 1, 2 ;
p Profit of the platform.

4.1. Promote by Performance (PP)

In this case, the platform will strictly align both products’ green advertising effort to their environmental performance. The
platform will take the products’ green level as the key indicator that decides the advertising investment. For the sake of simplicity, we
assume without a loss of generality that each product’s advertising investment will linearly increase with its green level rate, i.e.,
kiPP = e + ei k PP . Every consumer chooses product 1 or 2 to maximize the utility. For example, a consumer at location x will buy
e
i 3 i
product 1 if U1 > U2 . Consequently, the demand of each product is:

p2PP p1PP + s ( k1PP k 2PP ) + t2

d1PP = ,
t1 + t2

p1PP p2PP s ( k1PP k 2PP ) + t1

d2PP = .
t1 + t2

We adopt backward induction to analyze this Stackelberg game. Faced with the above demands, the two manufacturers’ profit
functions can be expressed as:

PP
p1PP + p2PP + s ( k1PP k 2PP ) + t2
1 = (p1PP (1 ) c1 ) ,
t1 + t2

PP
p1PP p2PP s ( k1PP k 2PP ) + t1
2 = (p2PP (1 ) c2 ) .
t1 + t2

The optimal reaction function p1PP (k PP ) and p2PP (k PP ) can then be derived:

2c1 + c2 s ( k1PP k 2PP ) t1 + 2t2

p1PP (k PP ) = + + ,
3(1 ) 3 3

c1 + 2c2 s ( k1PP k 2PP ) 2t1 + t2

p2PP (k PP ) = + .
3(1 ) 3 3

The three parts of the above price expressions reveal the impact of the green cost, advertising, and consumers’ preference on
pricing respectively. Because the environmental performance of product 1 is better than that of product 2 (i.e., e1 > e2) , it is intuitive
that the green promotion will have a positive impact on p1PP and a negative impact on p2PP . Moreover, these impacts will be intensified
with an increased green gap.
The platform as a leader incorporates p1PP (k PP ) and p2PP (k PP ) into its profit function to make advertising decision k PP , and the total
investment of the platform is k PP = k1PP + k 2PP here. The platform’s profit function can be expressed as:
PP
p = piPP diPP k PP.
i = 1,2

Maximizing the above profit function, we can obtain platform’s total green advertising investment:

(e1 + e2 )( e1 e2 ) 2s 2t 2 (2(1 )(t2 t1) (c1 c2 ))2

k PP = .
4(1 ) 2 (9(t1 + t2 )(e1 + e2 ) 2s 2 ( e1 e2 ) 2) 2

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Theorem 1. When the platform invests in green advertising strictly in proportion with the products’ environmental performance, there is a
unique solution, and the optimal decisions can be derived as follows.
The platform’s total investmentk PP is:
(e1 + e2 )( e1 e2 ) 2s 2t 2 (2(1 )(t2 t1) (c1 c2 ))2
k PP = .
4(1 ) 2 (9(t1 + t2 )(e1 + e2 ) 2s 2 ( e1 e2 ) 2) 2

The manufacturers’ optimal price decisions are:

2c1 + c2 t + 2t2 ( e1 e2 )2s 2 (2(1 )(t2 t1) (c1 c2 ))
p1PP = + 1 + ,
3(1 ) 3 6(1 )(9(t1 + t2 )(e1 + e2) 2s 2 ( e1 e2 )2)

c1 + 2c2 2t + t2 ( e1 e2 )2s 2 (2(1 )(t2 t1) (c1 c2 ))

p2PP = + 1 .
3(1 ) 3 6(1 )(9(t1 + t2 )(e1 + e2) 2s 2 ( e1 e2 )2)

The proof of this theorem and the supply chain players’ profit expressions are provided in Appendix A. From the optimal decisions
of the platform and both manufacturers, we arrived at several corollaries to investigate the effects of specific system parameters on
their decisions.
Corollary 1. Let e = e1 e2 , which reflects the difference of the environmental performance, and c = c1 c2 , which characterizes
the product’s green cost gap. Let t = t2 t1, which reflects the consumers’ environmental preference for greener products. The total investment
of the platformk PP and e , c, t , s satisfy the following relationship:
k PP k PP k PP k PP
> 0, > 0, < 0, > 0.
s e c t
SeeAppendix Bfor proof.
Corollary 1 states that the platform’s total investment should be increasing in the green level gap, consumers’ environmental
preference for greener products, and their sensitivity toward green advertising, while the investment should be decreasing in the cost
gap.
A large value of s can be interpreted to be a case in which the platform advertising influences consumers more strongly. The
platform invests more in advertising to obtain more profits. An increase of e means that with an increase in difference in ad-
vertising resources between the two products, the platform can reduce the cannibalization of the advertising effect between them that
occurs because the total demand is fixed. A large value of c means that the lower competitive advantage of the superior manu-
facturer will lead it to price the product higher to induce a demand decrease, and this will inhibit the platform’s green advertising
investment to a certain extent. A higher value of t can be interpreted as a case in which consumers prefer the greener product, so
more green advertising investment is profitable for platform.
Corollary 2. The manufacturers’ pricing decisions are influenced by the difference of the environmental performance e and the consumers’
environmental preference t . The influences satisfy the following relationships:
p1PP p2PP p1PP p2PP
> 0, < 0, > 0, < 0.
e e t t
SeeAppendix Cfor the proof.
This corollary states that manufacturer 1 can increase its retail price when consumers have a stronger environmental preference
and the green gap is greater. On the contrary, the inferior manufacturer can only decrease the price to attract consumers. An increase
in e means an increase in the competitive advantage of manufacturer 1, and manufacturer 1 will earn more advertising resources
from the platform, so it can charge a higher price. However, the inferior manufacturer must attract consumers at a lower price. A high
value of t can be interpreted as meaning that the greener product is more attractive to consumers, so the superior manufacturer will
have a higher price.
Corollary 3. Manufacturer i’s profit iPP will increase in its environmental performance while decreasing in its competitor’s and the platform’s
profit satisfies the following relationships:
PP PP PP PP PP PP
1 2 1 2 p p
>0> , <0< , > 0, < 0.
e1 e1 e2 e2 e1 e2
For a detailed proof, seeAppendix D.
A higher value of e1 can be interpreted as a greater gap between the two products’ green performances, and that difference will
increase the gap in advertising resources allocated between the two products, so the superior manufacturer will be more profitable.
Meanwhile, with the increased of the advertising resources allocation gap, the advertising cannibalization effect between the two
products will be reduced, which increases the platform’s profit.
As a benchmark, we analyze the case of k PP = 0 , which means the platform does not invest in advertising for either product. This

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mode provides a benchmark for us to identify the impact of green advertising on the manufacturers’ decisions. We can use it to derive
the profitable boundary and conditions determining whether a platform should propose green advertising strategies. Here, we use
superscript B to denote the benchmark case.
Theorem 2. Assume the platform has no green advertising scheme, i.e.,k B = 0 . Then, the optimal price decisions of the two manufacturers can
be derived as follows:
2c1 + c2 t + 2t2
p1B = + 1 ,
3(1 ) 3

c1 + 2c2 2t + t2
p2B = + 1 .
3(1 ) 3

Through the above analysis, we can observe that the effect of green advertising for each product will be cannibalized by the other
product’s advertising. This is consistent with the fact that when both products get green advertising, it will weaken consumers’
perception of green advertising. Consequently, Promote the Best strategy is proposed to eliminate this negative impact.

4.2. Promote the Best (PB)

In this case, the platform focuses its green advertising effort to invest in just one product, the one with the best environmental
performance. Because we are assuming e1 > e2 , the platform will only advertise product 1, so k 2PB = 0 , which means only product 1
will achieve an additional consumer utility due to green advertising. Let k PB denote the platform’s green advertising investment. Here,
we use superscript PB to denote the Promote the Best case. The demand of the two manufacturers can be derived from the utility
function as:

p2PB p1PB + s k PB + t2
d1PB = ,
t1 + t2

p1PB p2PB s k PB + t1
d2PP = .
t1 + t2
The formulation above fully describes the demand of the two manufacturers, and we can easily observe that green advertising has
a positive effect on manufacturer 1’s demand but manufacturer 2’s demand will decline. We also adopt backward induction to analyze
this Stackelberg game.
Faced with the demand depicted above, the two manufactures’ profit functions can be expressed as:
PB
i = (piPB (1 ) ci ) diPB i = 1, 2.

The best response function of the followers should be determined first. The optimal reaction function, p1PB (k PB ) and p2PB (k PB ) , can
be derived from the manufacturers’ profit function as:

2c1 + c2 t + 2t2 s k PB
p1PB (k PB ) = + 1 + ,
3(1 ) 3 3

c1 + 2c2 2t + t2 s k PB
p2PB (k PB ) = + 1 .
3(1 ) 3 3
The platform, as a leader, incorporates p1PB (k PB ) and p2PB (k PB ) into his profit function to make a green advertising investment
decision k PB .
PB
p = piPB diPB k PB.
i = 1,2

Maximizing the above profit function, we can obtain the optimal investment, one that satisfies:
s 2 2 (2(1 )(t2 t1) (c1 c2 ))2
k PB = .
4(1 )2 (9(t1 + t2) 2s 2 ) 2

Theorem 3. When the platform only promotes the one product with the best environmental performance, there is a unique solution, and in this
case, the optimal decisions are:
The platform investsk PB to only promote product 1:
s 2 2 (2(1 )(t2 t1) (c1 c2 ))2
k PB = .
4(1 )2 (9(t1 + t2) 2s 2 ) 2

The manufacturers’ optimal price decisions are:

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2c1 + c2 t + 2t2 s 2 (2(1 )(t2 t1) (c1 c2 ))

p1PB = + 1 + ,
3(1 ) 3 6(1 )(9(t1 + t2) 2s 2 )

c1 + 2c2 2t + t2 s 2 (2(1 )(t2 t1) (c1 c2 ))

p2PB = + 1 .
3(1 ) 3 6(1 )(9(t1 + t2) 2s 2 )
A proof of this theorem and each players’ profit expression is provided inAppendix E.
Corollary 4. Sensitivity analysis that compares the first derivation can reflect the volatility of decision variables when a specific factor
changes. The sensitivity of decision variables to a specific factor satisfies the following relationships:
k PB k PP k PB k PP k PB k PP
> > 0, > > 0, < < 0;
s s t t c c

p1PB p1PP p2PB p2PP

> > 0, < < 0;
s s s s

p1PB p1PP p2PB p2PP

> > 0, < < 0.
t t t t
SeeAppendix Ffor the proof.
Corollary 4 shows the comparison of parameter monotonicity in the two strategies. In the PB strategy, decision variables are more
sensitive to changes in exogenous variables than in PP. With the increase of advertising sensitivity s and consumers’ environmental
preference t , in either strategy, the platform will increase its green advertising investment and the superior manufacturer will raise
its retail price, while the inferior manufacturer will set a lower price. We also find that price is more sensitive to advertising and
consumers’ environmental preference in the PB strategy compared to the PP strategy, which means that with the increase of s and
consumers’ environmental preference t , greater advertising investment and price changes will occur in the PB mode. When the
competitive advantage of the superior company declines ( c ), the decrement of platform’s advertising investment is greater in the
PB strategy than PP strategy.

5. Analysis and discussion

In the previous section, we investigated the decisions in the benchmark mode and when using the PP and PB advertising stra-
tegies. In this section, we compare the related decisions among these three modes and identify supply chain performance from both
an economic and environmental perspective.
Proposition 1. The platform’s total green advertising investment using the PP and PB strategies satisfiesk PB > k PP .
SeeAppendix Gfor the proof.
This proposition shows the difference between the two strategies in terms of the platform’s total investment and implies that if the
platform chooses the PB strategy, total green advertising investment should be more than in the PP strategy. Because of the industry’s
fixed demand, promoting an individual product in the PB mode can circumvent the cannibalization effect of advertising two products,
as is done using the PP mode. This proposition demonstrates that the two strategies have different green advertising investments, but
it does not mean that the platform would prefer to choose the PP strategy to save promotion costs. The details of the profit analysis
are presented in Proposition 3.
Proposition 2. The demand and retail prices of these two products under the benchmark mode and the two green advertising strategies satisfy
the following relationships:
p1PB > p1PP > p1B , p2B > p2PP > p2PB ,

d1PB > d1PP > d1B , d 2B > d 2PP > d 2PB.

Proposition 2 shows the difference between these two advertising strategies and the benchmark in terms of the retail price and
product demand. For the superior manufacturer (manufacturer 1), both green advertising strategies have a positive influence on its
retail price and market share compared to the benchmark and, moreover, the PB strategy is the most favorable. These facts indicate
that platform-led green advertising gives an incentive to upstream manufacturers to upgrade their green performance. The manu-
facturers’ green processing investment can be compensated for by changes in price and market share. Meanwhile, for the inferior
manufacturer, both strategies have a negative impact on its retail price and market share and the PB strategy will maximize the
negative impact.
Proposition 3. The profit comparison of the manufacturers and platform in the benchmark mode and using the two green advertising
strategies satisfy the following relationships:
PB PP B B PP PB
1 > 1 > 1 , 2 > 2 > 2 ;

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PB PP B
p > p > p.

SeeAppendix Hfor the proof.

In accordance with Proposition 2, the manufacturers’ profit relationship stated in Proposition 3 is intuitive. The superior man-
ufacturer will always benefit from the platform’s advertising because it can receive all or the majority of advertising resources. The
inferior manufacturer’s profit will be hurt because of its inferior green advertising status. This result will lead to manufacturer
competition for green superiority status, so there is a probability of green upgrades in the whole industry. Proposition 3 also com-
pares the platform’s profit in the three cases, stating that any green advertising strategy can increase profits compared to the
benchmark. The platform could be more profitable by adopting the PB strategy, although it will invest more in green advertising, as
we have shown in Proposition 1. This result can give the platform a clear recommendation for its promotion strategy.
Proposition 4. The two manufacturers’ total profits under the PB and PP strategy satisfy the following relationships:

1. When s 2 < s 2 <

9(t 1 + t2 )
2
, we have 1
PB
+ PB
2 > 1 + 2 ,
PP PP

2. Whens 2 s2 , we have 2 ,where s = .

PB PB PP PP 2 (e1 + e 2 )(t1 + t2 )(6c1 6c2 + 3(t 1 t2 )((1 )))
< 1 + 2 < 1 +
(c1 c2 )( e1 e2 ) 2
SeeAppendix Ifor the proof.
Proposition 4 implies that when the green advertising sensitivity s is relatively high (but still satisfies the Assumption), all
upstream manufacturers can benefit more from the PB rather than PP. Moreover, the entire supply chain would have a better profit
performance using PB. Although manufacturer 1 always favors the PB strategy, manufacturer 2 will suffer a severe loss. When the
green advertising effect is not significant (s is relatively low), the PP strategy will have a better profit performance than the PB
strategy for all manufacturers. This proposition indicates that if consumers are not sensitive enough to green advertising, although the
platform can obtain more profit from the PB strategy than the PP strategy, the two manufacturers’ total profit will be damaged. When
green advertising can significantly influence consumers, green advertising will not damage the upstream manufacturer’s total profit.
Proposition 5. LetG = e1 d1 + e2 d2 denote the green performance of the whole platform market. G satisfies the following relationship under the
benchmark mode and the two green advertising strategies:

G PB > G PP > G B.

The result shows that when the products’ green level cannot be determined, the PB strategy is the best choice for the ecological environment.
(e1 e 2 ) s 2 (c 2 c1 + 2(1 )(t2 t 1))
Let G = G PB G B, G = 6(t 1 + t2 )(1 )(9(t 1 + t2) 2s 2 )
. G will be influenced by the two products’ green level gap e = (e1 e2) , the
consumers’ sensitivity toward the green advertising s, and the products’ green cost gap c = (c1 c2) . The influence satisfies the following
relationship:

G G G
> 0, < 0, > 0.
e c s

These results show that the whole platform market’s green performance will be better as the two products’ green level gap
increases, the consumers’ sensitivity toward green advertising increases, and the products’ green cost gap decreases. A large value of s
can be interpreted as a case in which platform advertising can have a better result on consumers so that products with higher
environmental performance will attract more consumers. The increase of c means the lower competitive advantage of the greener
products and their higher price will suppress their demand.
We summarize the main results in Table 2.

6. Extension

The results of previous sections show that the PB strategy is the best choice for the platform in this platform-led supply chain.
Therefore, we discuss follow-up questions for the PB strategy. Inferior manufacturers, in particular, could improve their environ-
mental performance to attain the top ranking and thereby obtain green advertising resources. Such overtaking also aligns with the
platform’s motivation to lead the green upgrading. In this section, we focus on this green overtaking strategy. Our objective is to
identify the conditions under which the inferior manufacturer is willing to expand the green processing cost to perform green
overtaking.
To address this issue, we extend the PB strategy. If manufacturer 2 achieves green overtaking, therefore, product 2’s new green
level should be greater than product 1’s, and we use c2 to represent manufacturer 2’s increased green cost. There will be two
important reversals. We use t1 and t2 to, respectively, denote the consumer’s travel cost sensitivity factor to the high and low green
level product as before. The first reversal is t1 and t2 , which happens because of the reversal of the two products’ green performance.
The second reversal is platform’s green advertising investment, platform will transfer the green advertising investment k E to product
2. Here, we use superscript E to denote this extension model. Considering the ranking reversal, the demand of the two manufacturers
can be derived as follows:

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Table 2
Summary and comparison of main results in different scenarios.
Decision variables

k: k PB > k PP > k B ;
k PB k PP k PB kPP kPB k PP
> > 0, > > 0, < < 0;
s s t t c c
p1 : p1 > p1PP > p1B ;
PB

p1PB p PP p1PB p1PP

> 1 > 0, > > 0;
s s t t
p2 : p2PB < p2PP < p2B ;
p2PB p PP p2PB p2PP
< 2 < 0, < < 0;
s s t t
Profit performance

p: PB
p > PP
p > p;
B

1: 1
PB
> 1
PP
> 1 ;
B

2: 2
PB
< 1
PP
< 2 ;
B

Green performance

G: G PB > G PP > G B;
G: G
> 0,
G
< 0,
G
> 0.
e c s

p2E p1E s k E + t1
d1E = ,
t1 + t2

p1E p2E + s k E + t2
d2E = .
t1 + t2

The two manufacturers’ profit in this case can be expressed as:

E
1 = (p1E (1 ) c1 ) d1E ,

E
2 = (p2E (1 ) (c2 + c2)) d 2E.

Accordingly, the optimal reaction pricing p1E (k E ) and p2E (k E ) can be derived from the manufacturers’ profit function as follows:

2c1 + (c2 + c2 ) 2t + t2 s kE
p1E (k E ) = + 1 ,
3(1 ) 3 3

c1 + 2(c2 + c2) t + 2t2 s kE

p2E (k E ) = + 1 + .
3(1 ) 3 3

The platform, as a leader, incorporates p1E (k E ) and p2E (k E ) into its profit function when making its investment decision k E .
E
p = piE diE kE.
i = 1,2

Theorem 4. There is a unique solution in this case. The optimal decisions are:
The platform investsk E to promote product 2:
s 2 2 (2(1 )(t2 t1) (c1 (c2 + c )))2
kE = .
4(1 )2 (9(t1 + t2) 2s 2 ) 2

The manufacturers’ optimal price decisions are:

2c1 + (c2 + c ) 2t + t2 s 2 (2(1 )(t2 t1) (c1 (c2 + c )))
p1E = + 1 ,
3(1 ) 3 6(1 )(9(t1 + t2) 2s 2 )

c1 + 2(c2 + c ) t + 2t2 s 2 (2(1 )(t2 t1) (c1 (c2 + c )))

p2E = + 1 + .
3(1 ) 3 6(1 )(9(t1 + t2) 2s 2 )

In comparison to manufacturer 2’s profit functions in Theorems 3 and 4, we can obtain the condition in which the inferior
manufacturer (manufacturer 2) is willing to adopt a green overtaking strategy. We summarize the condition in Proposition 6.

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Fig. 1. Green advertising investment regarding s and e .

2(t1 + t2)(1 )(9(t1 + t2) 2s 2 )

Proposition 6. When the increased green cost of manufacturer 2 satisfies c2 < 2 c1 c2 + , the inferior
6(t 1 + t2) s2

manufacturer will adopt the green overtaking strategy.

SeeAppendix Jfor the proof.
This proposition can guide inferior manufacturers. When the inferior manufacturer’s green upgrade cost is under c2 , it is
profitable to adopt a green overtaking strategy. The existence of c2 also demonstrates that platform-led advertising may lead to
green upgrades across the industry because of the ongoing race among manufacturers to have the best green performance.

7. Numerical examples

In this section, numerical examples are provided to examine the effects of sensitivity consumers have toward green advertising s,
green cost gap c1 c2 , consumers’ environmental preference for greener products t2 t1 and green performance gap e1 e2 on op-
timal green advertising investment k, price decisions and profit of supply chain members.
Example 1. We give this example to show how advertising sensitivity s and the two products’ green performance gap e1 e2 affect the
optimal green advertising investment k when using the two strategies. We assign initial values to other parameters:
t1 = 1, t2 = 100, c1 = 2, c2 = 1.5, = 0.2. s varies continuously while e1 and e2 is assigned with (10,0.1) and (10,1), which represent
high e and low e , the positive effect of green advertising sensitivity and green performance gap on advertising investment when
using the PB and PP strategies, as stated in Corollary 1, Corollary 4 and Proposition 1 is shown in Fig. 1.
Example 2. We give this example to show the effect of green cost gap c1 c2 and consumer environmental preference for greener
products t2 t1 on the optimal green advertising investment k when using two strategies by assigning initial values to other
parameters, t2 = 100, c2 = 1.5, s = 40, = 0.2, e1 = 10, e2 = 0.1. c1 varies continuously from 1.5 while t1 is assigned with 1 and 10,
which represent high t and low t , the positive effect of consumer preference for greener products and the negative effect of c on
advertising investment when using the PB and PP strategies, as stated in Corollary 1 and Corollary 4 is shown in Fig. 2.
Example 3. This example exhibits the effect of advertising factors on two manufacturer’s optimal price decisions when using the PB
and PP strategies by assigning initial values to other parameters, t1 = 1, t2 = 2, c1 = 2, c2 = 1.7, = 0.2, e1 = 10, e2 = 0.1. s varies
continuously, representing different sensitivity consumers have toward green advertising, the positive and negative effects of green
advertising sensitivity on product 1 and product 2 respectively, as stated in Corollary 2 and Proposition 2 is shown in Fig. 3.

Fig. 2. Green advertising investment regarding c and t .

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Fig. 3. Price decisions regarding s.

Example 4. This example show the effect of green performance gap of the two products e1 e2 on platform’s profit under different
promotion strategies by assigning initial values to other parameters, t1 = 1, t2 = 100, c1 = 2, c2 = 1.5, = 0.2, s = 30, e2 = 0.1. e1
varies continuously from 0.1, with the increase of it also reflects the increased green performance gap between the two products. The
positive effect of green performance gap on platform’s profit under the PP strategy, as stated in Corollary 3 and Proposition 3 is shown
in Fig. 4.
Example 5. This example exhibits the effect of advertising sensitivity and a certain proportion that platform charges from
manufactures’ sales on platform’s profit under different promotion strategies by assigning initial values to other parameters,
t1 = 1, t2 = 100, c1 = 2, c2 = 1.5, e1 = 10, e2 = 0.1. s varies continuously while is assigned with 0.2 and 0.4. The positive effect of
advertising sensitivity and on platform’s profit is shown in Fig. 5.
Example 6. This example exhibits the effect of green performance gap on two manufacturers’ profit under different promotion
strategies by assigning initial values to other parameters, t1 = 60, t2 = 100, c1 = 2, c2 = 1.5, = 0.2, s = 50, e2 = 1. e1 varies
continuously from 1, The positive and negative effects of green performance gap on the superior manufacturer and inferior
manufacturer’s profits, as stated in Corollary 3 and Proposition 3 is shown in Fig. 6.

8. Concluding remarks and future research

This study investigates the challenge of choosing a platform-led advertising strategy that simultaneously considers products’ green
performance and consumers’ green preference. The combination of environmental responsibility and market-driven forces create this
problem in the emerging platform market. Two representative advertising strategies, Promote by Performance (PP) and Promote the
Best (PB), have been formulated and discussed. The essential difference between the two strategies is the allocation rule of the
platform’s advertising investment. In PP, the platform’s advertising effort is split among products in proportion to their green per-
formance, whereas in PB, only the product with the best green performance receives any platform advertising effort.
We use a Stackelberg game to model the question and analyze scenarios in the two advertising strategies. In these scenarios, the
platform first determines the corresponding promotion investment, and then, manufacturers decide their prices. The results provide
decision support to supply chain players in each of these scenarios, give optimal ways for the manufacturers to choose product prices
and the platform to choose how much it will invest in green advertising. Several interesting findings were obtained from comparisons
of the optimal decisions in these two modes.
From an economic perspective, either of the two strategies can improve the platform’s profit compared to the benchmark case

Fig. 4. The profit of the platform regarding e .

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Fig. 5. The profit of the platform regarding s and .

Fig. 6. The profit of the two manufacturers regarding e .

without any green advertising. The platform can be more profitable with PB rather than PP, although the former requires more
advertising investment. The greener manufacturer can benefit from both green advertising strategies, while the inferior one will be
hurt. These facts indicate that platform-led green advertising gives incentives to upstream manufacturers to upgrade their green
performance. The inferior one can adopt a green overtaking strategy to remove this disadvantage when its increased green cost is
relatively low; our analysis determines this boundary condition. When the green advertising effect is not significant, even though the
platform may want to adopt the PB strategy to earn more profit, this strategy may create losses in the upstream industry. A coun-
terintuitive but interesting result is that if the superior manufacturer invests too much in green processing will inhibit the platform’s
green advertising investment. From an environmental perspective, the PB strategy allows the supply chain to achieve the best
environmental performance. Furthermore, if the inferior manufacturer chooses to upgrade its environmental performance to receive
more of the platform’s green advertising, a continuous green upgrade at the industry level can occur.
This study provides a new interface for platform marketing and green supply chain management that is constructive and has
implications. However, this paper has some limitations, and there are opportunities for future work. We used the Hotelling model to
characterize the market structure and consumer choice, meaning that the market size is fixed, and every consumer will eventually
buy a product. However, the market structure is more complicated in the platform mode, and the green advertising effect will be
limited in a fixed market. In our model, only one platform is involved in this supply chain, the green advertising problem could be
explored when facing multi-platform market sharing competition. Meanwhile, inspired by practicing in Taobao and JD, platforms
could integrate and improve the green performance of upstream firms with Supply Chain Finance (SCF) methods to support the
manufacturers’ green investment. In addition, the green level and green processing cost are exogenous in this study, we consider
using a function to depict the relationship between them in our future research. At last, platforms can better understand consumers
through data collection and analysis, future research could study the targeted green advertising problem of platforms. This study is
the first step in revealing the joint problem of green operations and green marketing within a platform background. Another in-
teresting topic for future research is exploring and designing a platform-led sustainable scheme to induce the whole supply chain to
improve its environmental performance continuously.

Acknowledgements

We are grateful to editor and anonymous referees for their valuable comments and constructive suggestions which have greatly
improved the quality of this paper. This research was supported by National Natural Science Foundation of China (Grant Nos. 71801210,
71801073, 71571171, 71631006), the Youth Innovation Promotion Association, CAS (Grant No. 2015364), Top-Notch Young Talents
Program of China, and China Postdoctoral Science Foundation Funded Project (Grant Nos. 2018M642544, 2018M642546).

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Appendix A. Proof of Theorem 1

We solve the dynamic game of the platform and the two manufactures using standard backward induction. We assume all
parameters are positive.
Step1: Solve manufacturers’ profit maximization problem.
The first derivation of 1PP and 1PP regarding to p1PP and p2PP respectively is

1
PP c1 + p1PP (1 ) ( p1PP + p2PP + ( k1 k2 ) s + t2 )(1 )
= +
p1PP t1 + t2 t1 + t2

2
PP c2 + p2PP (1 ) (p1PP p2PP ( k1 k2 ) s + t2 )(1 )
= +
p2PP t1 + t2 t1 + t2

The stationary point (p1PP , p2PP ) can be calculated through simultaneous equations. From the second derivative condition:
2 PP 2 PP
2(1 ) 2(1 )
1
2 = t 1 + t2
< 0 and 2
2 = t 1 + t2
< 0 , hence, 1
PP
and 1
PP
are concave. Therefore the 1
PP
and 1
PP
reaches the maximum at
(p1PP ) (p2PP )
the stationary point.
Step 2: Solve platform’s profit maximization problem.
As the Stackelberg leader, the platform anticipates the manufacturers’ best response, which we have shown in previous sections
PP
and incorporate it to his profit function p , then we can get the first derivation of regarding , let = 0 , it is easy to obtain
PP PP p
p k PP

(e1 + e2 ) ( e1 e2 ) st (2(1 )(t2 t1) (c1 c2 ))

k PP = .
2(1 )(9(t1 + t2 )(e1 + e2) 2s 2 ( e1 e2 )2)

And from the assumption in previous section, 2s 2 < 9(t1 + t2) , we can get 2s 2 ( e1 e2 ) < 9(t1 + t2)(e1 + e2) , because the
former assumption is stronger. Incorporate this condition into k PP > 0 , we can obtain c1 + c2 + 2(t1 t2)( 1 + ) > 0 .
2 PP
Then we demonstrate < 0 , So that the reaches the maximum at the stationary point.
p PP
PP 2
p
k
Step 3: Solve the optimal solution.
In the Stackelberg game, the optimal decisions the two manufactures and platform can be realized. The results are shown in
Theorem 2.
The profit functions of the three players are:

PP ( (c1 c2 )(6(t1 + t2)(e1 + e2) s 2 ( e1 e2 )2) + A1 )2

1 = 2
4(1 )(t1 + t2 )(9(t1 + t2)(e1 + e2) 2s ( e1 e2 )2)2

PP ((c1 c2)( 6(t1 + t2)(e1 + e2) s 2 ( e1 e2 )2) + A2 ) 2

2 = 2
4(1 )(t1 + t2)(9(t1 + t2 )(e1 + e2 ) 2s ( e1 e2 )2)2

where A1 = 2(1 )(t1 + t2 )(3t1 + 6t2 s 2 ( e1 e2 )2 and A2 = 2(1 )(t1 + t2)( 6t1 3t2 + s 2 ( e1 e2 )2

PP (B1 + B2 + B3 + B4 )
p =
4(t1 + t2 )(1 )2 (9(t1 + t2)(e1 + e2) 2s 2 ( e1 e2 )2)2

where
B1 = (c12 + c22)(s 2 ( e1 e2 )2 4(t1 + t2)(e1 + e2 )) + c1 c2 (8(t1 + t2 )(e1 + e2 ) 2s 2 ( e1 e2 )2), B2 = and
4c1 (t1 + t2)(1 )((5t1 + 4t2 )(e1 + e2 ) ( e1 e2 s2 B3 = 4c2 (t1 + t2)(1 ))2 , )((4t1 + 5t2 )(e1 + e2 ) s2 ( e1 e2 ))2
B4 = (t1 + t2 )(1 )2 ((5t12 + 8t1 t2 + 5t22 )(e1 + e2) s 2 (t1 + t2 )( e1 e2 ))2 □

Appendix B. Proof of Corollary 1

k PP k PP
To demonstrate c
< 0 is equal to demonstrate c
< 0.

k PP s ( e1 e2 )
=
c 2(1 )(9(t1 + t2)(e1 + e2 ) 2s 2 ( e1 e2 )2)
k PP
From 2s 2 ( e1 e2 ) < 9(t1 + t2)(e1 + e2) , we can derive c
< 0.
Other results in this Corollary can be demonstrated in the similar way. □

Appendix C. Proof of Corollary 2

The first derivation of p1PP regarding e is:

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p1PP 3( e1 e2 )(e1 + e2 ) s 2 (t1 + t2 )( c1 + c2 + 2(t1 t2)( 1 + ))

=
e (1 )(9(t1 + t2)(e1 + e2 ) 2s 2 ( e1 e2 )2)2
The first derivation of p1PP regarding t is:
p1PP s 2 ( e1 e2 )(1 )
=
t 3(1 )(9(t1 + t2)(e1 + e2) 2s 2 ( e1 e2 ) 2)

This Corollary can be demonstrated by incorporating c1 + c2 + 2(t1 t2)( 1 + ) > 0 and

9(t1 + t2)(e1 + e2) 2s 2 ( e1 e2 )2 > 0 into the first derivation above. □

Appendix D. Proof of Corollary 3

PP PP
Proof of 1
e1
> 0 is presented, other conclusions in this Corollary can be demonstrated in the similar way. To prove 1
e1
> 0 is
PP
equal to prove e1
1
> 0.
PP
1 3 s 2 e2 (e1 e2 )(t1 + t2)( c1 + c2 + 2(t1 t2)( 1 + ))
= >0
e1 2 (1 )(t1 + t2 ) e1 (9(t1 + t2)(e1 + e2) 2s 2 ( e1 e2 )2) 2
PP
1
e1
> 0 has been proofed. □

Appendix E. Proof of Theorem 3

Substitute the equilibrium into profit function, the platform and manufactures profit are realized as

PB ((c1 c2)(6(t1 + t2) s 2 ) + 2(1 )(t1 + t2)(s 2 3t1 6t2)2

1 =
4(1 )(t1 + t2)(9(t1 + t2) 2s 2 )2

PB ((c1 c2)(6(t1 + t2) s 2 ) 2(1 )(t1 + t2)(s 2 6t1 3t2) 2

2 =
4(1 )(t1 + t2)(9(t1 + t2) 2s 2 ) 2

PB (L1 + L 2 + L3 + L4 )
p =
4(1 ) 2 (t1 + t2)(9(t1 + t2) 2s 2 ) 2

where L1 = (c12 + c22)(s 2 4(t1 + t2)) + c1 c2 (8(t1 + t2) 2s 2 ), L 2 = 4c1 (t1 + t2)(1 )(5t1 + 4t2 s 2 ), L3 = and L4 =
4c2 (t1 + t2)(1 )(4t1 + 5t2 ) s2
4(t1 + t2)(1 ) 2 (5t12 + 8t1 t2 + 5t22 s 2 (t1 + t2)) . □

Appendix F. Proof of Corollary 4

p1PP
s p1PP
The first derivation of p1PP regarding s can be obtained easily, then we demonstrate e2
< 0. is decreasing in e2 . when
s
p1PP p1PP p1PB p1PB p1PP
e2 = 0 reaches the maximum. And when e2 = 0, s
equal to . So s
> s
> 0 . The proof of other results in this Corollary
s s
is similar. □

Appendix G. Proof of Proposition 1

k PP
It can be proved in the similar may as Corollary 1 by using the first derivation of e2
< 0 . Therefore k PP is decreasing in e2 ,and
e2 = 0 is the special case the same with PB. In this case, k PB reaches the maximum. So k PP < k PB . □

Appendix H. Proof of Proposition 3

PB PP s 2 2 e1 e2 ( c1 + c2 + 2(t1 t2)( 1 + )) 2
p p = >0
2(1 ) 2 (9(t1 + t2) 2s 2 )(9(t1 + t2)(e1 + e2) 2s 2 ( e1 e2 )2)

PP B s 2 2 ( e1 e2 )2 ( c1 + c2 + 2(t1 t2 )( 1 + ))2
p p = >0
36(1 ) (t1 + t2)(9(t1 + t2 )(e1 + e2 ) 2s 2 ( e1
2 e2 )2)
So PB
p > PP
p > p.
B
□

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Appendix I. Proof of Proposition 4

( 1PB + 2PB PP PP
2 )
The first derivation of 1
regarding e2 is:
e2
PB PB PP PP
( 1 + 2 1 2 ) N1 N2
=
e2 e2 (1 )(9(t1 + t2 )(e1 + e2) 2s 2 ( e1 e2 )2)3

where N1 = 3 e1 (e1 e2) s2 ( c1 + c2 + 2(t1 t2)( 1 + )) and N2 = (c1 c2)( e1 e2 )2s 2 (e1 + e2 )(t1 + t2 )(6(c1 c2) 3(t1 t2 )( 1 + )) .
Because of N1 > 0 , The negative or positive of the formula above can only be affected by N2 > 0 .
(e1 + e2)(t1 + t2)(6(c1 c 2) 3(t 1 t2)( 1 + )) ( 1PB + 2PB PP PP
2 )
If s 2 > , 1
> 0 and when e2 = 0, 1
PB
+ PB
2 1
PP PP
2 = 0 . We can obtain
(c1 c 2)( e1 e2 )2 e2
the results in Proposition 4. □

Appendix J. Proof of Proposition 6

Incorporate the optimal decisions into manufacturer 2’s profit function, E

2 can be realized as:

E (( c1 + c2 + c2 )(6(t1 + t2) s2
) + 2( 1 + )(t1 + t2)( s2 + 3t1 + 6t2)2
2 =
4(1 )(t1 + t2)(9(t1 + t2 ) 2s 2 )2
From E
2 = 2 ,
PB
we can obtain the threshold of c2

Appendix K. Supplementary material

Supplementary data associated with this article can be found, in the online version, at https://doi.org/10.1016/j.tre.2019.05.019.

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