EURO 2024 Copenhagen
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442. Shining light and harnessing shadows: The dual role of authentication platforms in online luxury retailing

Invited abstract in session WC-7: Behavior in supply chain collaboration, stream Behavioural OR.

Wednesday, 12:30-14:00
Room: 1019 (building: 202)

Authors (first author is the speaker)

1. Baolong Liu
School of Entrepreneurship and Management, ShanghaiTech University
2. Yanlu Zhao
Durham University

Abstract

This study examines an emerging type of online authentication platform for luxury products retailing, which has not been fully investigated due to its novel business models and innovative characteristics. While regular online retailing business delivers products directly from the sellers to consumers, such platforms first provide authentication services and then fulfill the orders. On the one hand, authentication builds trust between sellers and consumers to encourage authentic-product-selling behavior and expand demand (shine light), it also helps consumers avoid counterfeits by reducing counterfeit-selling behavior (harness shadows). On the other hand, it is costly, time-consuming, and sometimes even misidentifies items. To understand whether this lengthy and expensive process benefits both sellers and consumers, we develop queueing models to characterize sellers-authenticator collaboration and its impacts on consumer welfare. The analysis reveals that a collaboration, which increases both the authenticator’s and the sellers’ profit, may hurt consumer welfare due to the authentication fee and waiting, especially at intermediate levels of honesty and market belief. The results are shown to be robust through extensive experiments. As a practical remedy, we recommend that authenticators implement seller management systems to increase the level of honesty, which benefits all stakeholders.

Keywords

Status: accepted

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