Publication: Dual-channel competition: the role of quality improvement and price-matching
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Date
2021-05-06
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Taylor & Francis
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Abstract
Quality improvement and price-matching are two commonly used competing strategies by the retailers. However, it is still unclear how the retailers should deliberate over the two strategies when selling in both online and o ine markets. In this paper, we consider two dual-channel retailers selling a substitutable product to consumers in both online and o ine markets. Especially, the retailers compete in the online market, and their o ine markets are exclusive to themselves. We establish a game-theoretical model to investigate the trade-o between quality improvement and price-matching in competition, and the impact on retailers' pro ts and consumer surplus in the dual-channel market structure. The analysis shows that, rst, a retailer should choose to improve its quality to avoid price competition when the online market is small; second, when retailers engage in price competition, the retailer with larger o ine market is more willing to adopt price matching, while the retailer with a small share of o ine market can be hurt; third, quality improvement can always increase the consumer surplus, while price-matching always hurts consumer surplus due to price collusion.
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Attribution-NonCommercial-NoDerivatives 4.0 International
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IE Business School
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Jinpeng Xu & Yufei Huang & Emmanouil Avgerinos & Gengzhong Feng & Feng Chu, 2022. "Dual-channel competition: the role of quality improvement and price-matching," International Journal of Production Research, Taylor & Francis Journals, vol. 60(12), pages 3705-3727, June. https://doi.org/10.1080/00207543.2021.1931725.