Quality disclosure on a sharing platform with spatially differentiated suppliers and loss-averse buyers

Sharing platforms match small suppliers or service providers with small buyers. Suppliers on sharing platforms may choose to disclose information that concerns the quality of their product; or they may withhold such information because of privacy concerns. Buyers may experience a sense of loss if they purchase a product and the quality fails to meet their expectations. In this paper, we present a model of quality information disclosures on a sharing platform with spatially differentiated suppliers and loss-averse buyers. We study the impact of product differentiation, competition intensity, buyer loss aversion, suppliers' privacy concerns, and platform commission on supplier profits, platform profits, and total social welfare. We find that buyer loss aversion induces suppliers to make more quality disclosures, but also increases supplier profits. Buyers' loss aversion also lowers the threshold for quality disclosure (TQD) at which social welfare is maximised. We find that increasing product differentiation can have disparate impacts, either raising or lowering the suppliers' equilibrium TQD, dependent on the privacy costs to suppliers of quality disclosures. We show that suppliers can benefit from product differentiation only above a certain differentiation threshold, and when buyers' loss aversion is within a certain interval. When there is already a moderate level of product differentiation, and suppliers' privacy costs are low, further increases in differentiation can increase platform profits. We find that when more suppliers join a platform, competition becomes fiercer, which pushes up the TQD and induces suppliers to withhold quality information more often. High-quality suppliers can benefit from increased competition intensity if they disclose quality information. An excessively high commission rate will lead to a lack of quality information on the platform, which reduces the platform's profit. Platform profit is therefore non-monotonic, but supplier profit is monotonically decreasing in a rising platform commission.