Equilibrium analysis in dual-channel environment with dominant e-tailers

Abstract

This paper investigates the performance of the manufacturer and the e-tailer under the influence of a vertical variable (cross-channel effect) and a horizontal variable (e-tailers‘ competition) in the dominant e-tailer structure. A game theoretic pricing model of one common manufacturer and two e-tailers is built. Then, the corresponding equilibrium solution is derived from the model. Then, a comparison between the equilibrium results of the dominant e-tailer power structure and the dominant manufacturer power structure is performed. It is found that in the dominant e-tailer power structure, the equilibrium exists only when the cross-channel effect is positive and the competition parameter is not large.