Pricing Outcomes in Dual-Channel Monopoly and Partial Duopoly

Abstract

In this chapter, the authors first study the pricing strategies of a monopolist selling a product through stores in two channels, but under single management (or coordinated management) and then propose a framework for a model for a partial duopoly market conditions. The authors 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 is 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. The authors 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. This chapter concludes with an identification of parameters for channel pricing strategies under partial duopoly market conditions.