Online expansion: is it another kind of strategic manufacturer response to a dominant retailer?
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Publication date
2016Keyword
Online channelsChannel-supported network externality
Distribution channels
Channel conflict
Channel power
Game theory
Pricing pressure
Wholesale price
Dominant retailers
Weak retailers
Cooperative advertising
Online selling channels
Manufacturers
Internet entry
Profitability
Pricing strategies
Consumer welfare
Peer-Reviewed
YesOpen Access status
openAccess
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Show full item recordAbstract
The issues of channel conflict and channel power have received widespread research attention, including Geylani et al.’s (2007) work on channel relations in an asymmetric retail setting. Specifically, these authors suggest that a manufacturer can respond to a dominant retailer’s pricing pressure by raising the wholesale price for a weak retailer over that for the dominant retailer while transferring demand to the weak retailer channel via cooperative advertising. But, is online expansion another kind of strategic manufacturer’s optimal response to a dominant retailer? In this paper, we extend this work by adding a direct online selling channel to illustrate the impact of the manufacturer’s internet entry on firms’ demands, profits, and pricing strategies and on consumer welfare. Our analysis thus includes a condition in which the manufacturer can add an online channel. If such an online channel is opened, the channel-supported network externality will always benefit the manufacturer but hurt the retailers. Consumers, however, will only benefit from the network externality when a dominant retailer is present and will be hurt when both retailers are symmetric.Version
Accepted manuscriptCitation
He R, Xiong Y, Cheng Y et al (2016) Online expansion: is it another kind of strategic manufacturer response to a dominant retailer?. International Journal of Manufacturing Technology and Management. 30(1-2): 1-18.Link to Version of Record
https://doi.org/10.1504/IJMTM.2016.075836Type
Articleae974a485f413a2113503eed53cd6c53
https://doi.org/10.1504/IJMTM.2016.075836
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