Customer Choice between Electronic and Traditional Markets: An Economic Analysis

Switching between electronic and traditional markets, consumers nowadays impact profoundly on market makers. To successful conduct business, firms have to carefully making channel decisions to meet the needs of customers. The purpose of this article is to offer normative models for analyzing consumer channel selection behaviors between traditional and electronic markets. Referred to transaction cost economics and consumer decision processes, the models assumed that customers would like to purchase on the market that brings them the highest utility values in terms of effort, waiting time, and cost savings. Equilibrium solutions at which customers are indifferent in choosing between electronic and traditional channels are also derived for both risk-neutral and risk-averse consumers.