Platform Pricing Strategies When Consumers Web/Showroom

This paper studies the effects of price parity clauses (PPC) on consumer surplus and platform profit by investigating the strategic interactions among horizontally differentiated multi-channel retailers selling through online platforms as well as in their the direct channel. Consumers first choose which product to buy and then in which channel (online/direct) to finalize the purchase; platforms can decide about whether or not to impose PPCs. We show that the direct sales channel constrains platform pricing strategies such that PPCs have ambiguous effects on consumers. From the social welfare perspective, imposing PPCs is desirable when platforms are perceived as highly substitutable. Both platforms imposing price parity is always a Nash equilibrium but under certain conditions it can also arise another Nash equilibrium in which both platforms select an unrestricted pricing regime