Abstract: With the rapid development of Internet technologies, more and more online retailers are exploring new ways to sell products. In this context, the "offline evaluation, online purchase" mode has been increasingly viewed as an effective and novel way to provide information of the product to the customers and this mode can mitigate information gap exists in the O2O supply chain. However, the existence of cross-selling behavior and information asymmetry leads to incentive misalignment in the offline to online (O2O) supply chain. To solve this problem, we study an offline to online (O2O) supply chain consists of an online retailer and an offline store under asymmetric cross-selling revenue information. The offline store provides consumers with offline evaluation service for the product the online retailer provides.
The main work in this paper includes four parts. First, we proposed optimal commission contracts and analyzed the properties of the optimal commission contracts under asymmetric information and full information, respectively. Second, we analyzed the impacts of cross-selling revenue information asymmetry on the optimal commission contract and the impacts on the profit of online retailer, offline store and whole O2O supply chain. Third, we established a benchmark model in which the cross-selling revenue is set to zero to investigate the value of cross-selling within an O2O supply chain, and we analyzed the impact of cross-selling revenue on the profit of online retailer and offline store. Finally, we illustrate the impacts of the environment parameters on the commission contract parameters and the profits through a numerical example.
The results show that, the online retailer will choose an optimal commission contract with both a unique commission rate and a fixed payment to effectively motivate the offline store. The optimal commission contract can motivate the offline store in different ways, since the adjustment of the fixed payment can encourage the offline store to participate in the cooperation and the adjustment of the commission rate can encourage the offline store to provide service. Meanwhile, cross-selling partially substitutes the incentive role the commission contract plays under certain conditions. But when the offline store's cross-selling revenue is high type, the cross-selling revenue will exacerbate the adverse effect of asymmetric information on fixed payment, while the low cross-selling revenue will counteract the adverse effect of asymmetric information on fixed payment. The existence of information asymmetry leads to the change of commission contract parameters. Further, the information asymmetry may not decrease the performance of O2O supply chain or generate extra information rent. Moreover, cross-selling is favorable for the online retailer under certain conditions, but not for the offline store. Practical and theoretical guidance is provided in this paper to improve the value of the offline to online supply chain.

Key words: O2O supply chain, offline evaluation, online purchase, cross-selling, asymmetric information, commission contract