The perils of selling online: Manufacturer competition, channel conflict, and consumer preferences

Lu Hsiao () and Ying-Ju Chen ()

Marketing Letters, 2013, vol. 24, issue 3, 277-292

Abstract: Internet channels have grown rapidly in recent years due to advances in information technology. However, many leading manufacturers opt not to sell online. In this paper, we construct a theoretical model with competing manufacturers and an active retailer to explain this market phenomenon. We document the possibility of asymmetric channel structure despite the ex ante symmetry between the manufacturers. Moreover, the increasing prominence of online shopping behaviors does not necessarily lead to the increased adoption of Internet channels. The prevalence of dual-channel strategies can be regarded as a form of prisoners’ dilemma, and the manufacturers may intentionally intensify the product or channel substitution to escape from this undesirable outcome. We explain how demand expansion and competition mitigation drive these unintended consequences and provide some general guidelines for the managerial choice of channel structures. Copyright Springer Science+Business Media New York 2013

Keywords: Channel management; Manufacturer competition; Game theory (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (24)

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DOI: 10.1007/s11002-012-9216-z

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