Based on the two-sided market theory and the classic oligopoly model, this paper deduces the selection of long-term dynamic optimal subsidy rate with numerical simulation method after deriving the static results of online retail platform competition, and studies the application of subsidy strategy in online retail platform competition. The derivation of mathematical model shows that: (1) In the short term, in order to "survive" in the fierce competition, online retail platforms obtain more users and higher market share through subsidies, and the greater the price sensitivity of consumers, the higher the promotion effect of the increase of subsidy rate on the growth of users; (2) From a dynamic and longterm perspective, in order to achieve sustainable operation, the optimal subsidy intensity will show an inverted U-shaped change trend over time, that is, the subsidy intensity will be gradually increased in the initial stage and gradually reduced after a certain period of time. This paper also selects the listed financial report data of three major online retail platforms in China for empirical analysis, which confirms the main conclusions derived from the mathematical model. This paper answers the basic questions such as whether online retail platforms should adopt a subsidy strategy, the determination of subsidy intensity, and how the subsidy intensity changes over time. It has important reference value for understanding the basic logic of the subsidy strategy of the online retail platform and optimizing the governance of the online retail platform.