Note on Self-Restraint as an Online Entry-Deterrence Strategy

We develop a game-theoretical model to show that in the markets where price consistency across channels is critical, an incumbent brick-and-mortar retailer can deter the online entry of a pure-play e-tailer by strategically refraining from entering online. In the markets where price consistency is not a constraint, we find that the incumbent can deter the e-tailer’s entry only if it enters online and credibly operates the online channel as an independent profit center. In other words, the incumbent must be willing to cannibalize its own brick-and-mortar business by charging a low online price. We also discuss some social welfare implications of retail online entry and the managerial insights of our analysis.

• 저널Management Science · 52(11) · 1799–1809
• 토픽Consumer Market Behavior and Pricing · Marketing
• DOI10.1287/mnsc.1050.0566
• 저자Yunchuan Liu, Сунил Гупта, Z. John Zhang