Marketing games in social commerce

This study first provides a stylized model that captures the essential features of the SC(Social Commerce) business. The model focuses on the relationship between key decision issues such as marketing inputs and revenue stream. As more SCs join the industry, they are inevitably faced with fierce competition, which may lead to sharp increase in the total marketing and advertising expenditure. This type of competition may lead the industry away from its optimal development path, and at worst, toward a disruption of the entire industry. Such being the case, another goal of this study is to examine the possibility that the tragedy of commons may occur in the industry. Our basic analysis presents Nash equilibria with both homogeneous and heterogeneous players. Under a symmetric situation with homogeneous SCs, our analysis specifies the conditions that the tragedy of commons can occur. Further discussions provide strategic implications and policy directions to overcome the shortcomings intrinsic to the current business model, and help the industry to sustainably develop itself toward the next level.