Marketing Letters

, Volume 24, Issue 3, pp 277–292 | Cite as

The perils of selling online: Manufacturer competition, channel conflict, and consumer preferences

Article

Abstract

Internet channels have grown rapidly in recent years due to advances in information technology. However, many leading manufacturers opt not to sell online. In this paper, we construct a theoretical model with competing manufacturers and an active retailer to explain this market phenomenon. We document the possibility of asymmetric channel structure despite the ex ante symmetry between the manufacturers. Moreover, the increasing prominence of online shopping behaviors does not necessarily lead to the increased adoption of Internet channels. The prevalence of dual-channel strategies can be regarded as a form of prisoners’ dilemma, and the manufacturers may intentionally intensify the product or channel substitution to escape from this undesirable outcome. We explain how demand expansion and competition mitigation drive these unintended consequences and provide some general guidelines for the managerial choice of channel structures.

Keywords

Channel management Manufacturer competition Game theory 

Notes

Acknowledgements

We thank Frank R. Kardes (coeditor) and the reviewers for the valuable comments that significantly improved the paper. All the remaining errors are our own.

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.Department of Business AdministrationNational Chung Hsing UniversityTaichungTaiwan
  2. 2.University of CaliforniaBerkeleyUSA

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