Asymmetric Pricing across Channels

Among all the topics about price dispersion, asymmetric price dispersion between online and o¤-line channels and asymmetric pricing across traditional retailers, e-tailers, and multichannel retailers have received the most extensive empirical examination in the literature. However, in many cases, these studies generate contradictory results. This paper jointly models traditional retailer, e-tailer, and multichannel retailer into a market with both online and o¤-line channels and intends to provide a theoretical framework that may reconcile the con‡icting empirical …ndings. The asymmetric channel use by the sellers and the di¤erent customer compositions online and o¤-line result in asymmetric pricings across the three types of sellers. E-tailer prices the most aggressively in the market. To balance its two channels, multichannel retailer partially gives up the online customers that search prices to e-tailer. The competitive pricing by multichannel retailer forces traditional retailer to heavily depend on its loyal customers. In comparison, the online channel has relatively lower prices but not necessarily less price dispersion than the o­ ine channel. A data set of some most popular consumer electronics products at the leading price comparison site, Shopping.com, shows evidence consistent with the predicted relationship between e-tailers and multichannel retailers.