Competition Strategy of Retailers in Dual-Channel Based on the Hotelling Model

Rui Ding, Yunfu Huo, Huipo Wang
2017 ICIC Express Letters  
In order to analyze the decisions of independent retailers in different channels, an improved hotelling model based on considering customers' channel psychological preferences is built. With different product categories, network externalities and transaction costs, an analysis is made for online and offline retailers in game equilibrium prices, market shares and profits. The result shows that product category plays a significant role for channel choice and business decisions, and the product
more » ... h higher economic and experience value is more suitable for traditional channel. Due to the network externalities, a better market share does not translate into higher profits, consumers rather than retailers benefit from increasing network externalities. Channel with higher transaction cost will get smaller market share, so the retailers should adopt a lower game equilibrium price to attract more attention.
doi:10.24507/icicel.11.04.877 fatcat:ujovieeqmbaobemhza2exlhh4a