Impacts of Brand Spillover Effect on Sourcing and Quality Disclosure of the Platform’s Store Brand Under Asymmetric Information

Abstract

In reaction to evolving consumer preferences, prominent platforms, such as Amazon and JD, have progressively established proprietary store brands. However, the problems related to the sourcing of store brands and the disclosure of their quality information remain uncertain. To fill this gap, this paper utilizes game theory to develop a supply chain consisting of a national brand manufacturer, a third-party manufacturer, and a platform, focusing on the platform’s optimal sourcing strategy—determining whether to source its store brand from the national or third-party manufacturer—while also considering its quality disclosure strategy. We then examine how essential elements, specifically the brand spillover effect and the disclosure cost, influence these strategic decisions. Our research reveals that the quality information disclosure of the store brand occurs when the product quality surpasses a predetermined threshold. Additionally, although the elevated disclosure cost consistently diminishes quality disclosure, the impact of the brand spillover effect on quality disclosure is nonlinear. Finally, the platform’s sourcing strategy depends greatly on the brand spillover effect and the disclosure cost. Specifically, when the brand spillover effect is relatively large (small), the platform prefers to source the store brand from the national (third-party) manufacturer; with a moderate brand spillover effect, a higher (lower) disclosure cost encourages the platform to source from the national (third-party) manufacturer.

1. Introduction

The increasing consumer inclination towards store brands has compelled platforms to vigorously expand their product offerings [1]. Industry titans Amazon and JD illustrate this tendency, having introduced their inaugural store brands in 2005 and 2018, respectively. These projects have developed into strong brand portfolios, including JD’s J. ZAO, as well as Amazon’s Kindle series. Market performance data demonstrates the exceptional commercial success of this strategy; JD’s 2022 financial reports suggest that J. ZAO attained a 60% year-on-year sales increase, with over 100 product categories exceeding an average annual sales growth of 300% (https://www.nbd.com.cn/articles/2023-03-17/2716262.html (accessed on 20 June 2025)).

The swift growth of the market poses intricate strategic challenges for platforms concerning supply chain configuration. Platforms encounter a critical sourcing dilemma: the decision to acquire store brands from national manufacturers or specialized third-party producers. The previous strategy, illustrated by Guangdong Xinbao Electric Appliances Holdings Co., Ltd. (a manufacturer for high-end brands such as Xiaomi, which also produces JD’s J.ZAO products), utilizes the brand spillover effect [2,3]. This is because collaboration with these famous national manufacturers can aid platforms in establishing consumer trust in their store brands. Therefore, consumers are more likely to regard the quality of store brands as like that of national brands, thus drawing a broader array of prospective consumers for the store brands. As a result, consumer perception of quality parity between store brands and national brands significantly broadens the potential consumer base when products originate from the same manufacturing sources. Nevertheless, many of JD’s store brand categories still come from third-party manufacturers [4]. The underlying motivation for these alternative sourcing strategies is not clear.

At the same time, since consumers cannot directly assess product attributes when shopping online, it becomes difficult for them to ascertain the true value of products, exacerbating uncertainty about product quality [5,6]. Moreover, compared to established national brands that have been on the market for some time, consumer uncertainty about the quality of newly introduced store brands is even more pronounced. This uncertainty can deter purchases, negatively impacting businesses. In practice, platforms can disclose product quality information through sales assistance or in-store media. For example, marketing expenses of JD increased by 127.6% to RMB27.0 billion for the second quarter of 2025 from RMB11.9 billion for the second quarter of 2024 (https://ir.jd.com/news-releases/news-release-details/jdcom-announces-second-quarter-and-interim-2025-results (accessed on 18 September 2025)).

Recent studies have examined the operational and marketing management of store brands, the sourcing of store brands, and quality information disclosure. However, these studies primarily focus on symmetric information settings or neglect the interplay between quality information disclosure and sourcing strategies. Although disclosing high-quality information can build the reputation of store brands and help consumers make informed purchasing decisions based on their preferences and needs, it may also intensify competition between store brands and national brands, adversely affecting the platform’s profitability. Additionally, compared to sourcing store brands from third-party manufacturers, procuring from well-known manufacturers generates a brand spillover effect, which helps consumers form higher quality expectations. Due to these consumer impression differences between sourcing strategies, this study tackles three key research questions: (1) When does the platform have the incentive to disclose quality information of the store brand? (2) Will the platform choose to source the store brand from the national manufacturer or the third-party manufacturer? (3) How do the brand spillover effect and the disclosure cost affect these strategic decisions?

To address these research questions, we develop a three-part supply chain framework in which a platform distributes a national brand, sourced from a national manufacturer, alongside a store brand offering. The platform must make a crucial sourcing decision regarding its store brand: whether to source from the national manufacturer (Strategy $n$) or a third-party manufacturer (Strategy $t$). Under Strategy $n$, the store brand gains advantages from the brand spillover effect resulting from common manufacturing origins. The quality of the national brand is modeled as common knowledge among consumers due to its established market presence, while the quality of the store brand is characterized by ex ante uncertainty as a new market entrant. The platform must make a crucial decision about disclosing the store brand quality information to mitigate consumer uncertainty. This study characterizes equilibrium outcomes for all members of the supply chain within the combinatorial framework of sourcing and disclosure strategies. We analyze profit comparisons to identify the platform’s optimal quality disclosure and sourcing strategies across different market conditions.

This research uses game theory to analyze the decision-making behaviors and their interactions among the platform and the two manufacturers. Game theory, which elucidates the impact of interaction decisions among multiple decision-makers, has been extensively applied in the literature on store brand supply chain management to investigate the decision-making behavior of supply chain partners and is also utilized in this research [1,2,3,4]. Through the examination of the interactive dynamics between the national manufacturer, the third-party manufacturer, and the platform utilizing game theory, we can offer theoretical support and decision-making guidance for the platform in selecting sourcing and quality information disclosure strategies for the store brand.

The analytical results provide three key insights that have important theoretical and managerial implications. The brand spillover effect consistently improves platform profitability in the context of national manufacturer sourcing, yet its impact on quality disclosure is non-monotonic. A stronger brand spillover effect may paradoxically inhibit quality disclosure relative to third-party sourcing. Secondly, the disclosure cost exhibits dual effects: while it generally impedes quality information disclosure across sourcing strategies, it can paradoxically increase the platform’s expected profit under certain market conditions. Finally, the platform’s optimal sourcing strategy systematically depends on critical parameters: a higher disclosure cost combined with a significant brand spillover effect favors sourcing from the national manufacturer, whereas their absence systematically shifts the preference toward third-party sourcing.

The subsequent sections of this work are organized as follows. Section 2 examines pertinent literature. Section 3 establishes the analytical framework. Section 4 subsequently deduces equilibrium results across different sourcing strategies. Section 5 delineates main findings and managerial insights, while Section 6 offers concluding observations. Appendix A contains mathematical proofs.

2. Literature Review

This study is primarily related to three streams of literature: store brands, the sourcing strategy of store brands, and information disclosure. This section reviews key contributions in these areas and highlights the novelty of this study.

2.1. Store Brands

This research adds to the existing body of work on store brand operational and marketing strategies [7,8]. Previous studies indicate that the retailer can attain Pareto improvements via the introduction of store brands, as evidenced by Ru et al. [9], who found that the retailer in a category fosters mutually beneficial outcomes for both the manufacturer and the retailer. Ru et al. [10] demonstrate that bargaining power significantly influences the quality positioning of store brands, revealing that the stronger retailer tends to offer higher-quality store brands, whereas the weaker retailer chooses lower-quality options. Implications for profitability are further complicated in multi-channel environments, as demonstrated by Xiao et al. [11], where the retailer’s profitability is critically dependent on the calibration of store brand quality. Long et al. [12] identify significant welfare trade-offs: although the platform strategically lowers the price of the store brand, their prominent shelf placement results in measurable consumer welfare losses. Chen et al. [13] analyze the effect of implementing the store brand within the live streaming channel and indicate that the store brand typically erodes the manufacturer’s profitability. Zhang et al. [14] further study the strategic interaction between the store and the national brands, and they find that the manufacturer would dynamically adjust the national brand’s quality according to investment efficiency to cope with potential competition from the store brand.

However, unlike the above studies that focus on the symmetric information setting, a variety of studies have explored the impact of introducing store brands in scenarios characterized by information asymmetry, such as asymmetries in production cost [15,16,17], market demand [18], product quality [19], or the consumer acceptance of the store brand [4]. For example, Cao et al. [15] illustrate that the introduction of the store brand in the context of cost information asymmetry leads to Pareto-dominated outcomes, resulting in decreased profitability for both the retailer and the manufacturer. Cao et al. [16] study the optimal contract design strategy under cost information asymmetry. They find that when the national brand is more competitive (i.e., of higher quality or lower cost), the profits of both the national brand manufacturer and the retailer may increase. Luo et al. [17] indicate that the retailer often retains an informational advantage and is hesitant to reveal the actual pricing data of its store brand to the manufacturer. This informational advantage allows the retailer to secure a more advantageous position within the supply chain, resulting in increased earnings. Additionally, Shi and Geng [18] establish threshold conditions for the store brand adoption under different regimes of market uncertainty disclosure. Huang et al. [19] identify factors that influence quality information sharing in a dual-channel environment where the retailer offers both the national and the store brands. Tong and Xiao [4] reveal that the existence of asymmetric consumer acceptance of the store brand has the potential to hinder the platform’s ability to acquire the store brand from the national manufacturer.

This research distinguishes itself by making three unique contributions, in contrast to existing literature that primarily focuses on motivations and impacts of the store brand introduction within symmetric information environments (e.g., [9,11]). First, this study shifts the analytical focus to the operational decisions of e-commerce platforms in the context of asymmetric information. Second, a unified framework is developed to examine the selection of concurrent procurement strategies (national versus third-party sourcing) and endogenous quality disclosure. Finally, the brand spillover effect is introduced as a key driver of platform decision-making, highlighting its interaction with the disclosure cost as a crucial factor in optimal strategy formulation.

2.2. Sourcing Strategy of Store Brands

The second pertinent literature stream investigates the store brand sourcing strategy [20,21,22]. Platforms exhibit distributional advantages in warehousing and logistics; however, they fundamentally rely on manufacturing partners for production capabilities. Recent scholarly research has concentrated on the optimal sourcing configuration of the retailer, highlighting several key determinants: consumer service sensitivity coefficients [20], supply chain pricing power [23], and the intensity of manufacturer competition [24]. For example, Li et al. [20] point out that when consumers are highly sensitive to service, the e-retailer tends to produce store brands themselves. Conversely, when consumers are less sensitive to service, the e-retailer tends to purchase store brands from the third-party manufacturer or the national brand manufacturer. Liao et al. [23] examine the optimization of store brand quality decisions by the retailer, considering the influence of sourcing arrangement and channel power dynamics. Cheng et al. [24] illustrate that the introduction of store brands serves two strategic functions: it not only generates direct revenue but also acts as a bargaining tool to obtain advantageous wholesale conditions from the national manufacturer. This viewpoint is supported by Zheng et al. [25], who demonstrate that although store brands generally increase the retailer’s bargaining power, effective implementation necessitates strategic adjustment to market structures and cost configurations.

Moreover, there are some studies that also explore the sourcing strategy of the retailer for store brands between the national brand manufacturer and the third-party manufacturer. For instance, Li et al. [20] indicate that the optimal purchasing strategy of an e-tailer mainly depends on the production cost of the store brand and the sensitivity of consumers. When the production cost is low, the e-tailer tends to produce the store brand internally; otherwise, when the production cost is high, the e-tailer is more inclined to purchase the store brand from the third-party manufacturer. Cui et al. [26] pointed out that when the brand spillover effect is significant and the market size of the store brand is small, the platform tends to choose to purchase the store brand from the national brand manufacturers rather than the third-party one. This is because the brand spillover effect can significantly enhance the market acceptance of the store brand, thereby expanding its market share.

Different from the above studies, based on the quality information asymmetry between consumers and supply chain members, this paper jointly studies the optimal quality disclosure decision of the platform under different sourcing strategies, and finally obtains its optimal sourcing strategy. We find that the brand spillover effect of sourcing the store brand from the national manufacturer will affect the platform’s quality disclosure strategy and then affect its expected profit and preference for different sourcing strategies.

2.3. Information Disclosure

This study also corresponds with the literature investigating quality disclosure tactics in consumer uncertainty. Existing research indicates that while information disclosed by sellers can help consumers identify quality preferences and reduce uncertainty, whether sellers benefit from such disclosure remains unclear. For instance, Guan and Chen [27] study the interplay between the manufacturer’s information acquisition and quality disclosure strategies. Yu et al. [28] show that consumers can leverage the disclosed quality information to make more informed purchasing decisions, choosing products that meet their expectations and needs. Kuksov and Lin’s [29] seminal work established optimal frameworks for information disclosure when consumers encounter dual ambiguities concerning product features and preference alignment. Ghosh and Galbreth [30] illustrate how customer attention limitations and search expenses affect disclosure decisions, whilst Gu and Xie [31] investigate competitive disclosure motivations that enhance consumer-product alignment. Du et al. [32] explore how firms can strategically disclose quality and price information about new services to shape consumer beliefs and purchasing decisions. Cao et al. [33] compare the different quality disclosure strategies and conclude the manufacturer’s incentive of quality disclosure.

In addition, with the strong rise of e-commerce platforms and the fact that e-commerce platforms can collect a large amount of consumer information, many researchers have also begun to focus on information disclosure or sharing on e-commerce platforms. For example, Jiang et al. [34] indicate that both suppliers and retailers tend to shift the responsibility for information omissions onto each other to take advantage of the other’s costs to enhance consumers’ expectations of product quality. Li et al. [35] consider whether the online retailer can benefit from disclosing product demand when the manufacturer not only provides products but also competes with them. Based on the competition in the upstream of the supply chain, Liu et al. [36] study the optimal information sharing strategy of the e-commerce platform when multiple sellers simultaneously sell products through a single e-commerce platform. Tsunoda and Zennyo [37] investigate the relationship between the information sharing strategy of the e-commerce platform and the choice of cooperation mode of the manufacturer and find that information sharing can promote the manufacturer to choose the agency mode. Similarly, Zha et al. [38] show that the information sharing strategy can promote the manufacturer to cooperate with the e-commerce platform through a dual-channel mode. Ha et al. [39] examine the relationship between e-commerce platform information sharing strategy and manufacturer channel strategy.

However, the above studies do not consider the impact of different sourcing strategies adopted by the e-commerce platform on its quality disclosure strategies. When sourcing the store brand from the national manufacturer can help enhance brand awareness, the brand spillover effect will have a significant impact on the quality disclosure strategy of the platform through its pricing strategy, and ultimately affect its sourcing strategy by affecting the expected profit.

2.4. The Contribution of This Study

In summary, this study aims to explore how the platform decides on quality disclosure and sourcing strategies for its store brand in the presence of asymmetric information. Although numerous studies have examined the operational and marketing management of store brands (e.g., [9,11]), the sourcing of store brands (e.g., [23,24]), and quality information disclosure (e.g., [34]), they primarily focus on symmetric information settings or neglect the interplay between quality information disclosure and sourcing strategies. In contrast, our study extends this literature by utilizing a game-theoretic model that incorporates the brand spillover effect and asymmetric quality information to analyze the optimal quality information disclosure and sourcing strategies for the platform. We show that, although sourcing store brands from the national manufacturer can enhance consumer quality expectations through the brand spillover effect, this positive effect may be offset by the cost and strategic implications of quality disclosure. As a result, the brand spillover effect may inadvertently complicate the platform’s decision to disclose quality information, thus influencing its sourcing strategy. This insight highlights the interplay between the brand spillover effect and quality disclosure strategy, offering a new perspective on how the platform manages information disclosure and sourcing strategies. Therefore, our research not only contributes to the existing literature on the store brand sourcing strategy and information disclosure but also provides valuable insights for platforms to design effective information disclosure and sourcing strategies of store brands.

Table 1. The gap between our research and previous studies.

	Store Brand	Asymmetric Information	Sourcing Strategy of Store Brand	Information Disclosure	Brand Spillover
Chen et al. [13]	√
Zhang et al. [14]	√
Cao et al. [16]	√	√		√
Luo et al. [17]	√	√		√
Cheng et al. [24]	√		√
Zheng et al. [25]	√		√
Cui et al. [27]	√		√		√
Du et al. [32]				√	√
Cao et al. [33]	√		√		√
This paper	√	√	√	√	√

summarizes the differences between previous studies and our research.

3. Model Description and Assumptions

We model a tripartite supply chain comprising a national brand manufacturer ($M$), a third-party manufacturer ($T$), and an online marketplace platform ($P$). Following Cao et al. [16] and Xiao et al. [11], we suppose that the national brand manufacturer $M$ produces the national brand ($N$) distributed through the platform. To capture additional market segments, the platform can introduce an alternative store brand ($S$) that competes with the national brand. The platform faces a critical sourcing decision for the store brand: sourcing either from manufacturer $M$ (Strategy $n$) or from manufacturer $T$ (Strategy $t$). For analytical tractability and without loss of generality, we normalize production costs for both brands to zero.

Assume the two brands engage in price competition, with their demand functions as follows:

$$D_N=q_N-p_N+b{p}_S$$

$$D_S=q_S+\alpha (q_N-q_S)-p_S+b{p}_N$$

Let $b\in [0,1)$ denote the degree of substitutability between the national brand and the store brand. $D_N$ and $D_S$ ($p_N$ and $p_S$) denote the demands (retail prices) for the two brands, respectively. $q_N$ and $q_S$ represent their respective quality levels. Without loss of generality, we assume $q_N>q_S$, and $q_N-q_S$ indicates the quality difference between the two brands. When the platform sources the store brand from the national manufacturer (Strategy $n$), consumers’ perceived quality exhibits a spillover premium: $q_S+\alpha (q_N-q_S)$, where $\alpha \in [0,1)$ quantifies the brand spillover effect [2,3,4]. This formulation captures two essential properties: (1) the national brand’s reputation confers a perceived quality enhancement on the store brand; (2) the store brand’s perceived quality remains strictly dominated regardless of the brand spillover effect. The channel structure is shown in Figure 1.

Given the national brand’s established market presence, its quality level constitutes common knowledge among consumers and is normalized to be 1, i.e., $q_N=1$. Conversely, the store brand’s quality—modeled as a random variable $q_S~U[0,1]$—remains unobservable to consumers upon introduction. The platform, possessing private information about $q_S$ prior to product launch, strategically decides whether to disclose this quality information. Let ${\tilde{q}}_S$ denote consumers’ posterior quality perception, where ${\tilde{q}}_S=q_S$ under disclosure and ${\tilde{q}}_S={\overline{q}}_S$ under non-disclosure. Consistent with rational expectations literature [34], the platform will disclose only when quality exceeds an endogenous threshold ${\widehat{q}}_S$ where marginal disclosure benefits outweigh costs. Thus, if the platform does not disclose quality information, we have ${\overline{q}}_S=E\left[q_S|q_S\le {\widehat{q}}_S\right]={\widehat{q}}_S/2$. Additionally, information disclosure must be truthful—either the true quality is disclosed, or the platform remains silent [40,41]. Let $d_R\in \{0,1\}$ represents the platform’s disclosure strategy, where $d_R=1$ denotes disclosure and $d_R=0$ denotes non-disclosure. If the platform chooses to disclose, it incurs a fixed disclosure cost $c$. To ensure the platform has an incentive to disclose in equilibrium, assume $c\le \widehat{c}={\displaystyle \frac{(1-\alpha )(3+\alpha +4b)}{64(1-b^2)}}$; otherwise, a sufficiently large disclosure cost will always inhibit the platform from disclosing quality information.

The sequence of the game is illustrated in Figure 2. In Stage 1, following Li et al. [20] and Cui et al. [26], we assume that before observing the store brand’s quality information, the platform decides its sourcing strategy (i.e., Strategy $n$ or Strategy $t$). In Stage 2, the platform decides whether to disclose the store brand’s quality information. In Stage 3, after observing the quality information, the platform and manufacturers determine optimal prices. Specifically, under Strategy $n$, the national manufacturer first sets wholesale prices $w_N$ and $w_S$ for both brands, followed by the platform sets retail prices $p_N$ and $p_S$. Under Strategy $t$, the national manufacturer and the third-party manufacturer simultaneously set wholesale prices $w_N$ and $w_S$, respectively, while the platform sets retail prices $p_N$ and $p_S$.

Notably, this model assumes the platform decides its sourcing strategy before observing the quality level for the store brand. This is because sourcing is a relatively long-term decision; it can be changed occasionally, but manufacturers generally like contracts that span a year or longer. This is because they must allocate resources to meet the demands of producing the store brand. This assumption aligns with the literature on store brand sourcing [4,16,19].

Table 2. Summary of notations.

Notation	Explanation
Decision variable
$w_N$	The wholesale price of the national brand
$w_S$	The wholesale price of the store brand
$p_N$	The retail price of the national brand
$p_S$	The retail price of the store brand
Parameters
$D_{N/S}$	The demand for the two brands
$q_{N/S}$	The quality levels for the two brands
$b$	The degree of substitutability between the two brands, $b\in [0,1)$
$\alpha$	The degree of the brand spillover effect, $\alpha \in [0,1)$
${\tilde{q}}_S$	The consumers’ posterior quality perception under disclosure strategy
${\overline{q}}_S$	The consumers’ posterior quality perception under non-disclosure strategy
${\widehat{q}}_S$	The threshold where marginal disclosure benefits outweigh the cost
$d_R$	The platform’s strategy collection (Disclosure/Non-disclosure), $d_R\in \{0,1\}$
$c$	The fixed disclosure cost

summarizes the notations employed in this paper.

4. Model Analysis

4.1. Strategy $t$

Under Strategy $t$, the platform sources the store brand from manufacturer $T$, and thus, $\alpha =0$. Given the quality disclosure strategy, i.e., $q_S={\tilde{q}}_S$, the profit functions for the manufacturers and the platform are as follows:

$${\pi }_P=\left(p_N-w_N\right)\left(1-p_N+b{p}_S\right)+\left(p_S-w_S\right)\left({\tilde{q}}_S-p_S+b{p}_N\right)-d_{R}c$$

$${\pi }_M=w_N\left(1-p_N+b{p}_S\right)$$

$${\pi }_T=w_S\left({\tilde{q}}_S-p_S+b{p}_N\right)$$

By solving the firms’ problems, we derive Lemma 1.

Lemma 1.

Under Strategy $t$, given ${\tilde{q}}_S$, the optimal wholesale prices are $w_N^{t\ast }={\displaystyle \frac{2+b{\tilde{q}}_S}{4-b^2}}$ and $w_S^{t\ast }={\displaystyle \frac{b+2{\tilde{q}}_S}{4-b^2}}$, and the optimal retail prices are $p_N^{t\ast }={\displaystyle \frac{6-3b^2+b{\tilde{q}}_S(5-2b^2)}{8-10b^2+2b^4}}$ and $p_S^{t\ast }={\displaystyle \frac{b(5-2b^2)+3{\tilde{q}}_S(2-3b^2)}{8-10b^2+2b^4}}$. The equilibrium sales volumes are  $D_N^{t\ast }={\displaystyle \frac{2+b{\tilde{q}}_S}{8-2b^2}}$ and $D_S^{t\ast }={\displaystyle \frac{b+2{\tilde{q}}_S}{8-2b^2}}$, respectively.

Lemma 1 establishes that an enhancement in consumers’ perceived quality of the store brand (i.e., a larger ${\tilde{q}}_S$) induces strictly increasing wholesale price responses from both manufacturers. Consequently, the platform optimally adjusts retail prices upward, demonstrating monotonicity in ${\tilde{q}}_S$. Crucially, while elevated retail prices exert downward pressure on demand, this effect is dominated by the positive demand elasticity with respect to quality perception. Thus, equilibrium sales volumes for both brands maintain their monotonically increasing relationship with ${\tilde{q}}_S$.

Proposition 1.

Under Strategy  $t$, there exists  ${\widehat{q}}_S^t$ such that:

(1) 

The platform will disclose the store brand’s quality information if and only if $q_S\ge {\widehat{q}}_S^t$.

(2) 

${\displaystyle \frac{\partial {\widehat{q}}_S^t}{\partial c}}>0$ and ${\displaystyle \frac{\partial {\widehat{q}}_S^t}{\partial b}}<0$ always hold.

Proposition 1(1) characterizes the platform’s optimal disclosure strategy under Strategy $t$. Building on Lemma 1’s established monotonic relationship between platform profit and perceived quality, the platform adopts a threshold disclosure rule: quality information is revealed if and only if $q_S\ge {\widehat{q}}_S^t$. This equilibrium strategy reflects rational economic calculus-disclosure of subthreshold quality levels would both depress demand and incur unnecessary disclosure costs $c$, while supra-threshold disclosure generates net positive returns.

Proposition 1(2) identifies two critical determinants of the disclosure threshold ${\widehat{q}}_S^t$: the fixed disclosure cost $c$ and the product substitutability $b$. The comparative statics reveal: (i) The disclosure threshold increases monotonically with $c$, as a higher cost erodes the net benefit of quality disclosure, consistent with observed corporate non-disclosure practices; (ii) The threshold decreases with $b$, since greater substitutability attenuates inter-brand competition, thereby amplifying the marginal profit from quality disclosure.

4.2. Strategy n

Under Strategy $n$, the platform sources the store brand from manufacturer $N$, and thus, $\alpha \in [0,1)$. Again, given the disclosure strategy, i.e., $q_S={\tilde{q}}_S$, the profit functions are:

$${\pi }_P=\left(p_N-w_N\right)\left(1-p_N+b{p}_S\right)+\left(p_S-w_S\right)[{\tilde{q}}_S+\alpha (1-{\tilde{q}}_S)-p_S+b{p}_N]-d_{R}c$$

$${\pi }_M=w_N\left(1-p_N+b{p}_S\right)+w_S[{\tilde{q}}_S+\alpha (1-{\tilde{q}}_S)-p_S+b{p}_N]$$

By solving the firms’ problems, we derive Lemma 1.

Lemma 2.

Under Strategy $n$, given ${\tilde{q}}_S$, the optimal wholesale prices are $w_N^{n\ast }={\displaystyle \frac{1+\alpha b+b{\tilde{q}}_S(1-\alpha )}{2-2b^2}}$and $w_S^{n\ast }={\displaystyle \frac{\alpha +b+{\tilde{q}}_S(1-\alpha )}{2-2b^2}}$, and the optimal retail prices are $p_N^{n\ast }={\displaystyle \frac{3[1+\alpha b+b{\tilde{q}}_S(1-\alpha \left)\right]}{4-4b^2}}$ and $p_S^{n\ast }={\displaystyle \frac{3[\alpha +b+{\tilde{q}}_S(1-\alpha \left)\right]}{4-4b^2}}$. The equilibrium sales volumes are  $D_N^{n\ast }={\displaystyle \frac{1}{4}}$ and $D_S^{n\ast }={\displaystyle \frac{b+2{\tilde{q}}_S}{8-2b^2}}$, respectively.

Lemma 2 shows that under Strategy $n$, the impact of ${\tilde{q}}_S$ on prices aligns with Strategy $t$, i.e., $w_N^{n\ast }$, $w_S^{n\ast }$, $p_N^{n\ast }$, and $p_S^{n\ast }$ are monotonically increasing in ${\tilde{q}}_S$. Additionally, as the brand spillover effect strengthens (i.e., a larger $\alpha$), manufacturer $M$ can charge higher wholesale prices, leading the platform to set higher retail prices as well. Again, the joint positive effects of ${\tilde{q}}_S$ and $\alpha$ will dominate the negative effect of the increased retail prices, thus ensuring demand remains non-negatively affected (where $D_N^{n\ast }$ is independent of ${\tilde{q}}_S$ and $\alpha$, while $D_S^{n\ast }$ is monotonically increasing in both).

Proposition 2.

Under Strategy$n$, there exists  ${\widehat{q}}_S^n$ such that:

(1) 

The platform will disclose the store brand’s quality information if and only if $q_S\ge {\widehat{q}}_S^n$.

(2) 

${\displaystyle \frac{\partial {\widehat{q}}_S^n}{\partial c}}>0$ and ${\displaystyle \frac{\partial {\widehat{q}}_S^n}{\partial b}}<0$ always hold.

(3) 

${\displaystyle \frac{\partial {\widehat{q}}_S^n}{\partial \alpha }}<0$ if  $\alpha \in \left[0,{\displaystyle \frac{1-b}{2}}\right)$ and  $c\in \left(0,{\displaystyle \frac{1-b-2\alpha }{48-48b}}\right)$; otherwise, we have  ${\displaystyle \frac{\partial {\widehat{q}}_S^n}{\partial \alpha }}>0$.

Similarly, Proposition 2 shows that under Strategy $\mathrm{n}$, the platform will only disclose quality information if the store brand’s quality exceeds a threshold (i.e., $q_S\ge {\widehat{q}}_S^n$). Otherwise, disclosing low-quality information would harm demand and incur the disclosure cost. Additionally, a higher disclosure cost discourages disclosure, while a greater substitutability encourages it.

Interestingly, Proposition 2(3) reveals that while a stronger spillover effect boosts the platform’s profit, it does not always incentivize disclosure. Specifically, when both the brand spillover effect and the disclosure cost are below certain thresholds (i.e., $\alpha <{\displaystyle \frac{1-b}{2}}$ and $c<{\displaystyle \frac{1-b-2\alpha }{48-48b}}$), an increase in $\alpha$ encourages disclosure (i.e., ${\displaystyle \frac{\partial {\widehat{q}}_S^n}{\partial \alpha }}<0$). Conversely, beyond these thresholds, a higher $\alpha$ discourages disclosure. This is because while the brand spillover effect elevates the store brand’s perceived quality, it narrows the quality gap between disclosure and non-disclosure scenarios. When $\alpha$ approaches 1, the quality levels under both strategies converge, making disclosure less beneficial relative to its cost. Thus, under certain conditions, ${\widehat{q}}_S^n$ is monotonically increasing in $\alpha$.

5. Results and Managerial Insights

Based on the pricing and quality disclosure decisions of the platform under the two sourcing strategies, Section 5.1 firstly analyzes the differences in quality disclosure strategies between the two sourcing strategies. Section 5.2 then examines the platform’s optimal sourcing strategy and the influence of parameters such as the brand spillover effect and the fixed disclosure cost on this strategy.

5.1. Quality Disclosure Strategies Comparison

By comparing the quality disclosure thresholds as presented in Propositions 1 and 2, we can identify the differences in the platform’s disclosure strategies under the two sourcing strategies, as well as whether parameters like the brand spillover effect and the disclosure cost influence these differences.

Proposition 3.

Comparing the disclosure thresholds under Strategy $t$ and Strategy $n$, we find that when  $b\in [0,0.167)$,  $\alpha \in ({\alpha }_1,{\alpha }_2)$, and  $c\in (0,c_1)$, we have  ${\widehat{q}}_S^n<{\widehat{q}}_S^t$; otherwise, we have  ${\widehat{q}}_S^n\ge {\widehat{q}}_S^t$.

Proposition 3 and Figure 3 reveal that, compared to Strategy $t$, an increase Strategy $n$, in the brand spillover effect does not always incentivize the platform to disclose the store brand’s quality information when sourcing from a national manufacturer. Specifically, when the substitutability between the two brands is low and the disclosure cost is below a certain threshold, either an excessively weak or excessively strong brand spillover effect will discourage quality disclosure under Strategy $n$, leading to ${\widehat{q}}_S^n\ge {\widehat{q}}_S^t$. Conversely, a moderate brand spillover effect encourages disclosure. Recall from Proposition 2(3), the disclosure threshold under Strategy $n$ first decreases and then increases with $\alpha$, which explains this result.

The findings of Proposition 3 offer important managerial insights for the platform’s quality disclosure decision. Although sourcing from a national manufacturer enhances profits through the brand spillover effect, it does not always incentivize quality disclosure. Therefore, when deciding whether to disclose quality information, the platform must consider the interplay of product substitutability, the brand spillover effect, and the disclosure cost.

5.2. The Optimal Sourcing Strategy

Based on the above results, the platform’s expected profits under the two sourcing strategies can be calculated as:

$${\pi }_P^{t\ast }={\int }_0^{{\widehat{q}}_S^t}{\displaystyle \frac{4\left(4+b^2\right)+4b{\widehat{q}}_S^t\left(8+b^2\right)+5b^2{\left({\widehat{q}}_S^t\right)}^2+4{\left({\widehat{q}}_S^t\right)}^3}{16(1-b^2){(4-b^2)}^2}}\mathrm{d}{q}_S+{\int }_{{\widehat{q}}_S^t}^1\left[{\displaystyle \frac{4+5b^2+2b{q}_S\left(8+b^2\right)+q_S^2\left(4+5b^2\right)}{4\left(1-b^2\right){\left(4-b^2\right)}^2}}-c\right]\mathrm{d}{q}_S$$

$${\pi }_P^{n\ast }={\int }_0^{{\widehat{q}}_S^n}{\displaystyle \frac{4+\left[2\alpha +{\widehat{q}}_S^n\left(1-\alpha \right)\right][2\alpha +4b+{\widehat{q}}_S^n\left(1-\alpha \right)]}{64(1-b^2)}}\mathrm{d}{q}_S+{\int }_{{\widehat{q}}_S^n}^1\left[{\displaystyle \frac{1+\left[q_S+\alpha \left(1-q_S\right)\right][2b+q_S+\alpha \left(1-q_S\right)]}{16\left(1-b^2\right)}}-c\right]\mathrm{d}{q}_S$$

Proposition 4.

Under Strategy $n$, we have  ${\displaystyle \frac{\partial {\pi }_P^{n\ast }}{\partial \alpha }}>0$ always hold;  ${\displaystyle \frac{\partial {\pi }_P^{n\ast }}{\partial c}}<0$ if  $c<c_2$ and  ${\displaystyle \frac{\partial {\pi }_P^{n\ast }}{\partial c}}>0$ otherwise. Under Strategy  $t$, we have  ${\displaystyle \frac{\partial {\pi }_P^{t\ast }}{\partial c}}<0$ if  $c<min\{c_3,\widehat{c}\}$ and  ${\displaystyle \frac{\partial {\pi }_P^{n\ast }}{\partial c}}>0$ otherwise.

Intuitively, the platform’s expected profit decreases as the disclosure cost rises. However, Proposition 4 shows that once the disclosure cost exceeds a certain threshold, further increases may benefit the platform. This is because a higher disclosure cost reduces the platform’s willingness to disclose (i.e., ${\displaystyle \frac{\partial {\widehat{q}}_S^t}{\partial c}}>0$ and ${\displaystyle \frac{\partial {\widehat{q}}_S^n}{\partial c}}>0$ hold), which mitigates the negative impact of the disclosure cost on the expected profit. Thus, the platform’s expected profit may increase with $c$. Figure 4 illustrates that higher disclosure costs may paradoxically enhance the platform’s profitability.

Proposition 5.

Given $\alpha =0$, ${\pi }_P^{t\ast }>{\pi }_P^{n\ast }$ always holds.

Proposition 5 indicates that in the absence of brand spillover effects, the platform prefers sourcing from a third-party manufacturer. Without the brand spillover effect, Strategy $n$ offers no additional benefits. Moreover, the third-party manufacturer intensifies upstream competition, driving down wholesale prices and benefiting the platform. Thus, when $\alpha =0$, the platform consistently prefers Strategy $t$.

Proposition 6.

When the brand spillover effect exists (i.e., $\alpha >0$), the platform is incentivized to source from a national manufacturer.

As shown in Figure 5, the platform’s sourcing strategy depends on the magnitude of the brand spillover effect and the disclosure cost. Specifically, for the weak spillover effect, the platform prefers third-party procurement, as upstream competition suppresses wholesale prices, boosting profits. In contrast, with the strong brand spillover effect, the platform favors sourcing from a national manufacturer, where spillover-driven profit gains dominate the decision. Interestingly, with the moderate brand spillover effect, the high (low) disclosure cost incentivizes sourcing from a national (third-party) manufacturer. Here, the positive brand spillover effect offsets the disclosure cost, but when this cost exceeds a threshold, the brand spillover advantages become decisive.

These findings provide practical guidance for the platform’s procurement strategy. While the brand spillover effect enhances profits, the platform must weigh its value against the disclosure cost when selecting a procurement approach.

6. Conclusions

This study investigates the strategic interplay between quality disclosure and sourcing strategies for the platform, introducing store brands to compete with national brands. The analytical framework examines a dual-sourcing scenario where (1) the national brand is exclusively sourced from the national manufacturer, while (2) the store brand can be sourced either from the national manufacturer (enabling the brand spillover effect) or a specialized third-party manufacturer. Key model assumptions reflect fundamental market asymmetries: the national brand’s quality is common knowledge due to its market maturity, whereas the store brand’s quality remains ex ante unobservable to consumers as a market entrant. The platform strategically determines quality disclosure to resolve this information asymmetry and facilitate consumer decision-making. Through systematic comparison of expected profit functions under alternative strategy combinations, we derive equilibrium solutions for both sourcing and disclosure decisions.

Our analysis highlights several novel findings. First, regarding the strategy of quality information disclosure, our research reveals that the platform has an incentive to disclose this information if the store brand’s quality level exceeds a certain threshold; otherwise, disclosure is not profitable. Second, the platform’s sourcing strategy is heavily influenced by the brand spillover effect and the disclosure cost. Specifically, when the brand spillover effect is relatively large (small), the platform prefers to source the store brand from the national (third-party) manufacturer. Additionally, with a moderate brand spillover effect, a higher (lower) disclosure cost encourages the platform to source from the national (third-party) manufacturer.

6.1. Theoretical Implications

Our study contributes to the existing literature on quality disclosure and store brand sourcing in several important ways. First, this study extends the research on quality information disclosure strategies for store brands. We show that, compared with Strategy t, an increase in the brand spillover effect does not always motivate the platform to disclose quality information when sourcing from a national manufacturer. Specifically, when the substitutability between the two brands is low and the disclosure cost is below a certain threshold, either an excessively weak or an excessively strong brand spillover effect discourages quality disclosure under Strategy n. Conversely, a moderate brand spillover effect encourages disclosure.

Second, this study enriches the literature on store brand sourcing decisions. We find that there is no one-size-fits-all approach to store brand sourcing; instead, this decision depends on several key factors. Specifically, when the brand spillover effect is relatively large (small), the platform prefers to source the store brand from the national (third-party) manufacturer. When the brand spillover effect is moderate, a higher (lower) disclosure cost encourages the platform to source from the national (third-party) manufacturer.

6.2. Managerial Implications

These findings provide important managerial insights for retail practitioners concerning quality disclosure and sourcing strategies of the store brand. First, the platform must carefully balance the benefits and drawbacks of disclosing the store brand’s quality information. While disclosing high-quality information can enhance the reputation of the store brand and help consumers make more informed purchasing decisions, it may also intensify competition between the store brand and the national brand, thereby reducing the platform’s profitability. Moreover, the brand spillover effect resulting from sourcing from the national manufacturer influences consumers’ quality expectations, which in turn affects both the platform’s expected profit and its preference for quality disclosure. Therefore, when determining the quality disclosure strategy, platforms must weigh the trade-offs between the advantages and disadvantages while also considering their sourcing strategies.

Second, our results shed light on the underlying factors driving the variation in sourcing strategies, namely, why some store brands are sourced from national manufacturers while others are sourced from third-party manufacturers. This critical decision is influenced by parameters such as the brand spillover effect and the disclosure cost. Hence, platforms should carefully take these factors into account when formulating their sourcing strategies.

6.3. Limitations and Suggestions for Future Research

Several promising extensions merit future investigation. First, for analytical tractability, we normalize the production costs of both brands to zero. Future research could extend the model by incorporating differentiated production costs for the two brands. Second, while our analysis focuses on quality uncertainty, introducing demand uncertainty would represent another valuable research direction. Exploring how both types of uncertainty interact could further enhance the understanding of supply chain decisions under imperfect information. Finally, considering quality level as an endogenous decision variable can enrich our study. These extensions would further bridge the gap between theoretical modeling and practical implementation.