Channel Prices of a Homogenous Product in a Dual-Channel Monopoly

Channel Prices of a Homogenous Product in a Dual-Channel Monopoly

Farooq M. Sheikh, M. Ruhul Amin, Nafeez Amin
Copyright: © 2005 |Pages: 13
DOI: 10.4018/jeis.2005040104
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Abstract

We study the pricing strategy of a monopolist selling a product through stores in two channels, but under single management (or coordinated management). We find that the monopolist generally charges a higher price in the brick-and-mortar store than the price charged in the Internet store. If, however, there exists a sufficiently large fraction of buyers who would strictly prefer to buy the product from the Internet store instead of the physical store at any given price, the monopolist might charge the same price in both the stores. We also find that physical store price of a dual-channel monopoly is higher than the physical store price of a single-channel monopoly; the price charged in the Internet store is generally lower than the single-channel monopoly price.

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