Target: Pricing and Channel
A;
Yan, Ruiliang. “Pricing strategy for companies with mixed online and traditional retailing distribution markets”. Emerald Group Publishing, Limited. Business And Economics--Marketing And Purchasing. Santa Barbara, United Kingdom. 2008. Pp 48-56. Scholarly Journals. http://search.proquest.com/abicomplete/docview/220598485/13C4FE6AEA125A60378/1?accountid=11620 When a company employs a multi-channel strategy, an important question is what pricing strategy should be adopted so that the company can optimize its profit. In our research we focus on the pressing question of a multi-channel pricing strategy under different market structures. We use a game theory model to specifically study the following questions: Under the Bertrand, Stackelberg and channel integration market structures, what is the optimal pricing strategy that the multi-channel company should adopt? Under which market structure can the multi-channel company draw the largest profit?
The rest of our paper is organized as follows. Section 2 provides a summary of the relevant literature. Section 3 presents our modeling framework. Section 4 studies the pricing strategies under three different types of market structures - the Bertrand, the Stakelberg and the channel integration structures - and shows the important findings. Section 5 illustrates our findings by means of numerical examples. A conclusion and managerial implications are presented in Section 6.
2. Literature review
In this section, we review the relevant marketing literature to position our paper. We review some of the papers that examine issues that arise when firms sell product through multiple channels. In particular, we focus on those papers that explicitly account for the presence of the online channel.
2.1 Multi-channel retailing
The growth of multi-channel retailing is an off-shoot of the growth of online marketing. The proportion of multi-channel shoppers has gone up in recent years ([31] Wallace et al. , 2004). A recent
Yan, Ruiliang. “Pricing strategy for companies with mixed online and traditional retailing distribution markets”. Emerald Group Publishing, Limited. Business And Economics--Marketing And Purchasing. Santa Barbara, United Kingdom. 2008. Pp 48-56. Scholarly Journals. http://search.proquest.com/abicomplete/docview/220598485/13C4FE6AEA125A60378/1?accountid=11620 When a company employs a multi-channel strategy, an important question is what pricing strategy should be adopted so that the company can optimize its profit. In our research we focus on the pressing question of a multi-channel pricing strategy under different market structures. We use a game theory model to specifically study the following questions: Under the Bertrand, Stackelberg and channel integration market structures, what is the optimal pricing strategy that the multi-channel company should adopt? Under which market structure can the multi-channel company draw the largest profit?
The rest of our paper is organized as follows. Section 2 provides a summary of the relevant literature. Section 3 presents our modeling framework. Section 4 studies the pricing strategies under three different types of market structures - the Bertrand, the Stakelberg and the channel integration structures - and shows the important findings. Section 5 illustrates our findings by means of numerical examples. A conclusion and managerial implications are presented in Section 6.
2. Literature review
In this section, we review the relevant marketing literature to position our paper. We review some of the papers that examine issues that arise when firms sell product through multiple channels. In particular, we focus on those papers that explicitly account for the presence of the online channel.
2.1 Multi-channel retailing
The growth of multi-channel retailing is an off-shoot of the growth of online marketing. The proportion of multi-channel shoppers has gone up in recent years ([31] Wallace et al. , 2004). A recent