Network effects and quality regulation in social e-commerce platforms: implications for digital marketplace competition

Social e-commerce platforms are reshaping digital marketplaces by integrating social interactions with online transactions. This study develops a game-theoretic model to investigate platform mode selection, pricing strategies, and quality regulation decisions in a multi-sided market with consumers, sellers, and content creators. We compare three platform modes: pure social media, pure e-commerce, and social e-commerce. We find that when the penalty for low-quality products is high, pure e-commerce becomes less attractive. In contrast, when quality risks are limited, pure e-commerce may remain the preferred mode. Moreover, platforms may face a Prisoner’s Dilemma during social-commerce transformation when development costs are moderate. Finally, social e-commerce platforms require a higher quality regulation intensity than pure e-commerce platforms because quality failures affect not only transactions but also consumer engagement and ecosystem sustainability. These findings provide insights into how platforms balance monetisation, quality regulation, and strategic positioning in digital platform ecosystems. This study examines how digital platforms should choose business models, design pricing strategies, and manage quality regulation when integrating social media and e-commerce functions. The findings offer practical guidance for platform managers, sellers, and policymakers. First, platforms should not adopt social-commerce simply because competitors are doing so. When quality failures generate substantial penalties and reputation losses, platforms should carefully evaluate whether integrating social functions can create sufficient additional value to justify the development costs. Second, competitive pressure may lead platforms into inefficient social-commerce transformation (Prisoner’s Dilemma). When development costs are moderate, competing platforms may both adopt social-commerce functions even though both platforms obtain lower profits than under remaining in their original modes. Therefore, managers should focus on cost control strategies rather than simply following competitors. Third, compared with pure e-commerce platforms, social e-commerce platforms require more intensive quality regulation. Platforms should strengthen seller screening, product monitoring, and creator management mechanisms to maintain sustainable growth.