Unifying or Discriminating : Competitive Pricing Strategies for Multi-Channel Retailers

Multi-channel retailers face a crucial decision of whether to charge the same price online and offline. In a competitive environment with two multi-channel retailers, the pricing strategies are complicated by the heterogeneity of consumers and their cross-channel/cross-retailer purchasing behaviors. To examine the competitive pricing strategy, we construct a duopoly model with two multi-channel retailers for which consumers are heterogeneous in their brand preferences. Additionally, consumers have heterogeneous product familiarity and are distinguished as informed and uninformed consumers. Store assistance is available to help uninformed consumers find their matching products. We discover that retailers tend to adopt the uniform pricing strategy at equilibrium when consumers' brand preferences are strong, while the dual pricing strategy is favored when the store assistance cost is high. The interaction of these two driving forces results in an asymmetric pricing equilibrium when brand heterogeneity is intermediate and the store assistance cost is relatively low. At this asymmetric equilibrium, the uniform pricing retailer can obtain higher profits by offering a uniform price lower than the online and offline prices of its dual pricing rival