Pricing Outcomes in Dual-Channel Monopoly and Partial Duopoly (original) (raw)
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Production and …, 2006
In this paper, we analyze a scenario where a manufacturer with a traditional channel partner (i.e., a retailer) opens up a direct Internet channel that is in competition with the traditional channel partner. We first consider that in order to mitigate channel conflict the manufacturer, who chooses wholesale prices as a Stackelberg leader, commits to setting a direct channel retail price that matches the retailer's price in the traditional channel. Under this general equal-pricing strategy, we determine the effect of more specific pricing strategies on prices and profits of the manufacturer and the retailer. These specific strategies are: (1) keep wholesale prices as they were before, (2) keep retail prices as they were before, or (3) select wholesale and retail prices that optimize profits for the manufacturer. Within these strategies we identify and summarize cases when the resulting prices are lower than the pre-Internet prices, and when they are higher, relating them to the respective channel costs and to the relative convenience to the consumer of the Internet channel. We find that Strategy 3-the specific equal-pricing strategy that optimizes profits for the manufacturer-often is also preferred by the retailer and customers (through lower prices) over the other equal-pricing strategies. We next consider the implications of the equal-pricing constraint through a numerical experiment that indicates that the equal-pricing strategy is appropriate as long as the Internet channel is significantly less convenient than the traditional channel. If the Internet channel is of comparable convenience to the traditional channel, then the manufacturer has tremendous incentive to abandon the equal-pricing policy-at great peril to the traditional retailer.
In this paper, we analyze a scenario where a manufacturer with a traditional channel partner (i.e., a retailer) opens up a direct Internet channel that is in competition with the traditional channel partner. We first consider that in order to mitigate channel conflict the manufacturer, who chooses wholesale prices as a Stackelberg leader, commits to setting a direct channel retail price that matches the retailer's price in the traditional channel. Under this general equal-pricing strategy, we determine the effect of more specific pricing strategies on prices and profits of the manufacturer and the retailer. These specific strategies are: (1) keep wholesale prices as they were before, (2) keep retail prices as they were before, or (3) select wholesale and retail prices that optimize profits for the manufacturer. Within these strategies we identify and summarize cases when the resulting prices are lower than the pre-Internet prices, and when they are higher, relating them to the respective channel costs and to the relative convenience to the consumer of the Internet channel. We find that Strategy 3-the specific equal-pricing strategy that optimizes profits for the manufacturer-often is also preferred by the retailer and customers (through lower prices) over the other equal-pricing strategies. We next consider the implications of the equal-pricing constraint through a numerical experiment that indicates that the equal-pricing strategy is appropriate as long as the Internet channel is significantly less convenient than the traditional channel. If the Internet channel is of comparable convenience to the traditional channel, then the manufacturer has tremendous incentive to abandon the equal-pricing policy-at great peril to the traditional retailer.
Exploiting the opportunities of internet and multi-channel pricing: an exploratory research
Journal of Product & Brand …, 2004
Smart firms are not worried about the impact of the Internet on pricing, but realise that they have the unique opportunity to exploit new options and improve their marketing performance. Multi-channel pricing is one of the most interesting opportunities firms can exploit in the digital economy. Reviews the existing literature on pricing on the Internet and on multi-channel pricing. Presents the results of an exploratory research on price opportunities perceived by firms. Offers a picture of the possible multi-channel options available to firms and highlights the importance of the value for and of the customer.
Durham University, 2020
Pricing strategy is one of the greatest difficulties facing multi-channel retailers (Gupta, Ting & Tiwari, 2019) as many retailers have switched to a multiple channel system (Ailawadi & Farris, 2017). Retailers are using their price strategies to encourage consumers to use either online or offline channels. Therefore, in many cases retailers want consumers to notice the price difference between channels. However, in some circumstances, retailers do not want consumers to notice the differentiation. Therefore, this thesis will answer two main research questions: How should optimal pricing be set for multiple channels that will make consumers more/less likely to notice price differentiation? What types of price presentation format are more/less likely to make consumers notice price differentiation? Prior investigations have studied noticeable price differences by using differential price thresholds in a single channel (e.g., Cheng & Monroe, 2013a; Sirvanci, 1993) rather than studying differential price thresholds for a single product when there is one retailer and two channels. Multi-channel retailers use different monetary and non-monetary promotions as price presentation formats. Previous researchers have studied the roles of monetary and nonmonetary promotions in the price-framing effect. However, so far no study has investigated the price effect of different promotion presentation formats on noticing differentiation. This thesis integrates just noticeable difference theory and prospect theory to investigate consumers' ability to notice price differentiation in different price presentation formats. It does so by conducting two experimental studies, each with 720 participants. It investigates the antecedent factors that influence the noticing of price differentiation in multiple channels. The results of the thesis have important implications for the multi-channel literature and for managerial practice. They show that consumers are more likely to notice price differentiation when the difference between the (online and offline) regular prices is 20%. The results also suggest that there is a difference in noticing price differentiation in different monetary promotional formats. The thesis can guide marketing managers to set optimal prices for single products when there is one retailer and two channels. They can decide whether to use the same price in both channels or different prices in the different channels depending on whether their strategy is to attract consumers and increase purchase intentions by making the price difference noticeable or not.
Strategies and Price Competition on the Internet: Evidence on French Data
1 Abstract: French E-commerce sales have tremendously grown these last two years, even if the estimated amount of transaction is still marginal. Beyond this relative success, E-commerce raises many questions. Are electronic markets more competitive than traditional markets? How can we explain price dispersion on Internet? This paper deals with the pricing strategies of on-line retailers. For this purpose, we have collected data about CD prices on Internet during June and July 2001. This data set enables us to establish that online prices are strongly dispersed and rather volatile. Then we develop a repeated game model to analyze behaviors of CD retailers. Hence we prove that the probability of price collusion should increase with the age of a CD and decrease with its popularity. In other words, a collusion between CD retailers is more likely when the demand for a CD declines. This hypothesis is not rejected by econometric regressions on price level and price dispersion. These result...
Handbook of Pricing Research in Marketing, 2009
This chapter provides a critical review of research on pricing within a channel environment. We fi rst describe the literature in terms of increasing time horizons of decision-making in a channel setting: (1) retail pass-through (2) pricing contracts and (3) channel design, all of which occur within a given market environment. We then describe the emerging empirical literature on structural econometric models of channels and its use in (1) inferring channel participant behavior and (2) policy simulations in a channel setting. We also discuss potential areas for future research in each area. * We thank the editor Vithala Rao and Jiwoong Shin for comments and suggestions on the chapter.
Pricing Decision under Dual-Channel Structure considering Fairness and Free-Riding Behavior
Discrete Dynamics in Nature and Society
Under dual-channel structure, the free-riding behavior based on different service levels between online channel and offline channel cannot be avoided, which would lead to channel unfairness. This study implies that the dual-channel supply chain is built up by online channel controlled by manufacturer and traditional channel controlled by retailer, respectively. Under this channel structure, we rebuild the linear demand function considering free-riding behavior and modify the pricing model based on channel fairness. Then the influences of fair factor and free-riding behavior on manufacturer and retailer pricing and performance are discussed. Finally, we propose some numerical analysis to provide some valuable recommendations for manufacturer and retailer improving channel management performance.
Retailer Pricing and Competitive Effects
Journal of Retailing, 2009
Until recently, retailers have taken an either/or approach to competition: either reacting fiercely to competitive price changes or ignoring them altogether. Today, however, firms make a concerted effort to determine and quantify competitive effects. In this paper, we focus on how pricing and competitive effects interact as a general phenomenon, particularly as it applies to retailing. We attempt to construct a general framework that enhances our understanding of the emerging research issues in the area of pricing and competitive effects, and we examine their implications for practice. The areas that show high promise/opportunity are in the online setting for all types of goods-fashion, perishable and packaged staples, and durables-particularly with respect to pricing for profitability and understanding the impact of competition. Other opportunities include understanding the pricing and competitive effects in the perishable goods category sold in specialty, discount, and convenience stores.
Do market characteristics impact the relationship between retailer characteristics and online prices
Journal of Retailing, 2007
We propose that market characteristics interact with retailer characteristics to determine online prices. The retailer characteristics examined include-service quality of a retailer, channels of transaction provided by a retailer and the size of a retailer. The market characteristics capture the level and nature of competition, and the price level of a product. We utilize a Hierarchical Linear Model (HLM) framework for capturing and testing the proposed interactions. The better fit between the model and the online market structure is reflected by a twenty-five percent increase in explainable price dispersion over results from comparable studies. Our study demonstrates that while retailer characteristics do impact online prices, this influence is significantly enhanced or diminished by the accompanying market characteristics.