Abstract
This paper studies strategic distribution channel decisions incorporating Internet sales for two competitive firms. Firms specifically have three alternative strategies; the pure online strategy, the traditional channel strategy (so called "bricks-and-mortar") and the "hybrid" channel strategy (so called "clicks-and-mortar"). Consumers are assumed to be heterogeneous with regard to their location, while they must incur some "interaction costs" {i.e., the out-of-pocket costs/benefits of interacting indirectly with the firms when they purchase online). Therefore, the relation between the distribution of consumers' location and the convenience of an online channel plays an important role in determining the firms' channel strategies. Based on this motivation, we analyze the equilibrium channel strategies in the presence of the ex-post competition on prices by using a game theoretic approach and explore how firms' locations and interaction costs influence the equilibrium outcome. We show that if firms' products are sufficiently differentiated from each other, the equilibrium channel strategy is determined independently of the rival's location and interaction cost, but there is an impact on equilibrium profit. This result is in a sharp contrast to the well-known necessity of differentiation to relax intense price competition. Furthermore, a sensitive analysis based on some numerical experiments suggests that unless a firm has a very attractive online channel compared to its rival's, the advantage/ disadvantage of its location rather than interaction cost is likely to contribute to creating its competitive advantage/disadvantage.
| Original language | English |
|---|---|
| Pages (from-to) | 342-354 |
| Number of pages | 13 |
| Journal | Journal of Japan Industrial Management Association |
| Volume | 59 |
| Issue number | 4 |
| Publication status | Published - 2008 |
Fingerprint
Keywords
- Clicks-and-mortar
- Competitive strategy
- Game theory
- Hotelling model
- Mrketing
ASJC Scopus subject areas
- Industrial and Manufacturing Engineering
- Applied Mathematics
- Management Science and Operations Research
- Strategy and Management
Cite this
Competitive distribution channel strategy of firms under duopoly. / Ilda, Hiroya; Yamada, Yoshiyasu; Matsubayashi, Nobuo; Namba, Kazuaki.
In: Journal of Japan Industrial Management Association, Vol. 59, No. 4, 2008, p. 342-354.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Competitive distribution channel strategy of firms under duopoly
AU - Ilda, Hiroya
AU - Yamada, Yoshiyasu
AU - Matsubayashi, Nobuo
AU - Namba, Kazuaki
PY - 2008
Y1 - 2008
N2 - This paper studies strategic distribution channel decisions incorporating Internet sales for two competitive firms. Firms specifically have three alternative strategies; the pure online strategy, the traditional channel strategy (so called "bricks-and-mortar") and the "hybrid" channel strategy (so called "clicks-and-mortar"). Consumers are assumed to be heterogeneous with regard to their location, while they must incur some "interaction costs" {i.e., the out-of-pocket costs/benefits of interacting indirectly with the firms when they purchase online). Therefore, the relation between the distribution of consumers' location and the convenience of an online channel plays an important role in determining the firms' channel strategies. Based on this motivation, we analyze the equilibrium channel strategies in the presence of the ex-post competition on prices by using a game theoretic approach and explore how firms' locations and interaction costs influence the equilibrium outcome. We show that if firms' products are sufficiently differentiated from each other, the equilibrium channel strategy is determined independently of the rival's location and interaction cost, but there is an impact on equilibrium profit. This result is in a sharp contrast to the well-known necessity of differentiation to relax intense price competition. Furthermore, a sensitive analysis based on some numerical experiments suggests that unless a firm has a very attractive online channel compared to its rival's, the advantage/ disadvantage of its location rather than interaction cost is likely to contribute to creating its competitive advantage/disadvantage.
AB - This paper studies strategic distribution channel decisions incorporating Internet sales for two competitive firms. Firms specifically have three alternative strategies; the pure online strategy, the traditional channel strategy (so called "bricks-and-mortar") and the "hybrid" channel strategy (so called "clicks-and-mortar"). Consumers are assumed to be heterogeneous with regard to their location, while they must incur some "interaction costs" {i.e., the out-of-pocket costs/benefits of interacting indirectly with the firms when they purchase online). Therefore, the relation between the distribution of consumers' location and the convenience of an online channel plays an important role in determining the firms' channel strategies. Based on this motivation, we analyze the equilibrium channel strategies in the presence of the ex-post competition on prices by using a game theoretic approach and explore how firms' locations and interaction costs influence the equilibrium outcome. We show that if firms' products are sufficiently differentiated from each other, the equilibrium channel strategy is determined independently of the rival's location and interaction cost, but there is an impact on equilibrium profit. This result is in a sharp contrast to the well-known necessity of differentiation to relax intense price competition. Furthermore, a sensitive analysis based on some numerical experiments suggests that unless a firm has a very attractive online channel compared to its rival's, the advantage/ disadvantage of its location rather than interaction cost is likely to contribute to creating its competitive advantage/disadvantage.
KW - Clicks-and-mortar
KW - Competitive strategy
KW - Game theory
KW - Hotelling model
KW - Mrketing
UR - http://www.scopus.com/inward/record.url?scp=77950961492&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=77950961492&partnerID=8YFLogxK
M3 - Article
AN - SCOPUS:77950961492
VL - 59
SP - 342
EP - 354
JO - Journal of Japan Industrial Management Association
JF - Journal of Japan Industrial Management Association
SN - 0386-4812
IS - 4
ER -