Targeted Incentives, Broad Impacts: Evidence from an E-commerce Platform

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See all articles by Xiang Hui

Xiang Hui

Washington University in St. Louis - John M. Olin Business School

Meng Liu

Washington University in St. Louis

Tat Chan

Washington University in St. Louis - John M. Olin Business School

Date Written: October 11, 2020

Abstract

Digital platforms sometimes offer incentives to a subset of sellers to nudge behaviors, but how do these targeted incentives affect all sellers? In this paper, we study a policy change on a large e-commerce platform that offers financial incentives only to platform-certified sellers when they provide fast handling and generous return policies on their listings. We find that both the targeted and non-targeted sellers become more likely to adopt the promoted behavior after the policy change. Exploiting a large number of markets on the platform, we find that in markets with a larger proportion of the targeted population---hence more affected by the policy change---non-targeted sellers are more likely to adopt the promoted behavior and experience a larger increase in sales with little price changes. This finding is consistent with our key insight that a targeted incentive may increase demand for non-targeted sellers if both the targeted type and the promoted behavior are observed and valued by consumers. Our results have managerial implications for digital platforms that use targeted incentives.

Keywords: targeted incentives, quality provision, signaling, demand expansion

Suggested Citation

Hui, Xiang and Liu, Meng and Chan, Tat, Targeted Incentives, Broad Impacts: Evidence from an E-commerce Platform (October 11, 2020). Available at SSRN: https://ssrn.com/abstract=

Xiang Hui

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Meng Liu (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Tat Chan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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