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Economy question from UPSC CSE-Prelims, 2026

An e-commerce revenue model where the seller has control over pricing but doesn't keep products in stock and instead transfers customer orders and shipment details to a third-party supplier, who then ships the goods directly to the customer, is called:

Last updated Jun 9, 2026
Correct Answer: Option A — Dropshipping Model
Why Dropshipping is the correct choice:
In a Dropshipping Model, the e-commerce merchant acts as a middleman. The merchant hosts a storefront, markets the products, and sets their own retail prices (controlling the profit margin). However, they carry zero inventory. When a customer buys an item, the merchant purchases it at a wholesale price from a third-party supplier (often a manufacturer or wholesaler), who handles the logistics and ships the product directly to the end consumer.

Why the other options are incorrect:
(b) Affiliate Revenue Model: In this model, the marketer does not sell the product or handle the checkout transaction. They merely redirect traffic to another seller's website via a tracking link and earn a set commission if a purchase is made. They have no control over the product pricing.

(c) Transaction Fee Revenue Model: This is an infrastructure model used by marketplaces or payment gateways (like eBay, Amazon, or PayPal). They charge a fee or commission percentage to facilitate a transaction between independent buyers and sellers. They do not sell products directly.

(d) Agency Revenue Model: In this model, an agent connects buyers and sellers (common in real estate, travel, or freelancing) and earns a predetermined commission or fee for brokering the deal. The pricing is usually set by the primary seller, not the agent.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.

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UPSC CSE 2026 Prelims

Details

Exam UPSC CSE
Stage Prelims
Year 2026
Subject Economy
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