Product quality incentive of online seller based on advertising price discount

The incentive implemented by e-commerce platform to improve product quality of online seller under asymmetric information is discussed. The product quality improvement of online seller will cause the quality costs, and the product quality supervision by the e-commerce platform will cause the supervision costs. As rational persons, online seller and Internet presence provider maximize their own interests, which leads to the product quality of e-commerce is not very good. Linking the advertising costs of online seller on trading platform with the quality of product provided by online sellers, this paper proves that establishing the contracts that advertising price discount positively correlated with qualified product rate can encourage online sellers to improve the product quality, and also proves that the contract is a win-win for both online sellers and e-commerce platform.