NIU Baozhuang, CHEN Lingyun, LI Qiyang
In cross-border e-commerce, free-shipping service and product price jointly influence consumers' purchase decisions. When brand-owners offer free-shipping services, they will bear both logistics and import tariff fees. Otherwise, these fees will be paid by the consumers. In this paper, we study the free-shipping decisions of two brand-owners A and B when they sell through a common cross-border e-commerce platform with the consideration of the two-dimensional competition of product and logistics service. We develop four strategy combinations (N,N), (N,F), (F,N) and (F,F) and focus on the strategies of brand-owners A and B in terms of free-shipping. We find that the relative size of logistics service costs paid by brand owners and consumers and product differentiation have a decisive influence on brand owners' decisions on free-shipping. We find that there exist three equilibrium strategies (N,N), (N,F), and (F,F) when the two brand-owners' products are highly differentiated, depending on the logistics fee directly borne by consumers. In contrast, when product competition is fierce, (N,N) and (F,F) are the equilibrium strategies. The tariff rate may affect the possibility of various equilibriums significantly, and the increase of tariff rate may lead to the convergence of brand owners' free-shipping strategies, that is, (N,N) and (F,F) are more likely to occur. This shows the unique role of tariffs in the decision of corporate in cross-border settings.