Competitive pricing of mixed retail and e-tail distribution channels

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

332 Scopus Citations
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Author(s)

  • Dong-Qing Yao
  • John J. Liu

Detail(s)

Original languageEnglish
Pages (from-to)235-247
Journal / PublicationOmega
Volume33
Issue number3
Publication statusPublished - Jun 2005
Externally publishedYes

Abstract

In addition to regular retail distribution channels, a firm nowadays can avail themselves of such information technology (IT) as the Internet to distribute products directly "on line" (referred to as an "e-tail" distribution channel). The mix of retailing with e-tailing has added a new dimension of competition to the firm's distribution channels. The central issue of this competition is the competitive pricing policies between retail and e-tail distribution channels. In this paper, we consider the price competition between these two channels under two market game settings: the Bertrand and the Stackelberg price competition models. In the Bertrand competition, the manufacturer and retailer simultaneously select e-tail and retail price, respectively, while in Stackelberg competition, the manufacturer as a leader selects the e-tail price, then the retailer selects retail price. We obtain both the Bertrand and Stackelberg equilibrium pricing policies, and compare the profit gains under these two competitions. Based on our results, we propose an appropriate strategy for the manufacturer to adopt when adding an e-tail channel. We also show that an optimal wholesale price exists under a different market structure that could be used to encourage the retailer to accommodate the additional e-tail channel. © 2004 Elsevier Ltd. All rights reserved.

Research Area(s)

  • Bertrand and Stackelberg price competition, Distribution channels, E-tail and retail chain, Supply chain

Citation Format(s)

Competitive pricing of mixed retail and e-tail distribution channels. / Yao, Dong-Qing; Liu, John J.

In: Omega, Vol. 33, No. 3, 06.2005, p. 235-247.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review