Combined effect of the multichannel retailer’s price self-matching strategy and channel role

Abstract

This paper considers a mixed market including a multichannel retailer and an online-only retailer. Using game-theoretic model, we investigate the combined effect of channel role and price self-matching strategy. Results show that the multichannel retailer is most likely to benefit from price self-matching when the two retailers have symmetrical channel roles, and price self-matching cannot benefit a multichannel retailer who is channel leader. This cautions that the multichannel retailer needs to be careful in his/her channel role when adopting price self-matching. Furthermore, when the multichannel retailer adopts price self-matching, the two retailers should raise online retail prices, which will dampen online competition and benefit the online-only retailer. Moreover, compared with the symmetric channel roles, when consumer’s product valuation is large or horizontal differentiation is small, the asymmetric channel roles enhance the strength of online competition dampening effect and the promotion effect of price self-matching on the online-only’s profit; when consumer’s product valuation is small or horizontal differentiation is large, however, the opposite appears. Interestingly, in the case without price self-matching, one retailer achieves the highest profit when he/she is channel follower, then when he/she is channel leader, and finally when the two retailers have the symmetric channel roles.