Managing Multirooming: Why Uniform Price Can Be Optimal for a Monopoly Retailer and Can Be Uniformly Lower

Yuxin Chen (), Yue Dai (), Zhe Zhang () and Kun Zhang ()
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Yuxin Chen: NYU Shanghai, Shanghai 200122, China
Yue Dai: School of Management, Fudan University, Shanghai 200433, China
Zhe Zhang: School of Management, Fudan University, Shanghai 200433, China
Kun Zhang: School of Economics & Management, Nanjing University of Science and Technology, Nanjing 210094, China

Management Science, 2024, vol. 70, issue 5, 3102-3122

Abstract: Retailers managing both online and offline channels have to decide whether to adopt the uniform (i.e., charging the same price online and offline) or dual (i.e., charging different prices online and offline) pricing strategy. This decision is made even more challenging as consumers are increasingly multirooming as they may search offline and then purchase online (showrooming) or the other way around (webrooming). In this paper, we develop an analytical model to examine such a decision. The model takes into consideration (1) consumers’ uncertainty about digital and nondigital product attributes, (2) consumers’ costs of showrooming as well as webrooming, and (3) the prevalence of costly product return. We show that uniform pricing can be optimal for a monopoly retailer even though consumers have different costs for shopping online versus offline and there is no intrinsic disutility against price discrimination by consumers. In addition, when the uniform price is optimal, it can be lower than both the offline and online prices under optimal dual pricing. This is because, compared with dual pricing, uniform pricing eliminates consumers’ uncertainty about the offline store’s price so that they are more likely to search the nondigital attribute at the offline store and buy the fitted product. Moreover, a relatively higher online price has to be used under dual pricing to encourage consumers to search offline for the purpose of reducing the product return costs.

Keywords: uniform pricing; multichannel; multirooming (search for similar items in EconPapers)
Date: 2024
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