Profit-increasing asymmetric entry

Pazgal, Amit; Soberman, David; Thomadsen, Raphael

doi:10.1016/j.ijresmar.2015.08.002

Cited by 19 publications

(10 citation statements)

References 35 publications

(27 reference statements)

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“…Our article is also related to recent studies on when the entry of a competitor into the market increases the profits of the incumbents (e.g., Chen and Riordan 2007; Ishibashi and Matsushima 2009; Pazgal, Soberman, and Thomadsen 2016). In these studies, the entry of a newcomer changes the marginal consumers the incumbents are competing for and may increase equilibrium prices in the market when each firm expects the competitors to raise prices.…”

Section: Related Literaturementioning

confidence: 97%

When Showrooming Increases Retailer Profit

Kuksov

Liao

2018

Journal of Marketing Research

105

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Showrooming, the phenomenon of consumers visiting a brick-and-mortar (B&M) store to learn about products but then buying online to obtain lower prices, is attracting increased attention both in business practice and in academic literature. It is considered a major threat to the B&M retailers, and determining “how to fight it” seems to be the only consideration. However, the manufacturer's need for retail informational services has always been one of the essential reasons for retailers to exist and is a means for retailers to achieve profitability. The popular arguments about the threat of showrooming ignore the strategic role of the manufacturer in the distribution channel. This article analytically shows that when the manufacturer's decisions are considered (i.e., when the manufacturer–retailer contract is endogenous), consumers’ ability to engage in showrooming may lead to increased, rather than decreased, profitability for B&M retailer(s). Thus, retail efforts to restrict showrooming behavior may be misguided. This result holds even if the manufacturer is restricted to wholesale-only contracts and is not allowed to price discriminate between channels.

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Section: Related Literaturementioning

confidence: 97%

When Showrooming Increases Retailer Profit

Kuksov

Liao

2018

Journal of Marketing Research

105

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“…Thomadsen (2012) found that the competitor's product line expansion sometimes benefits the incumbent firm, and Pazgal et al. (2016) showed that all incumbent firms could be better off after the entry of a new competitor, which only competes with one of the incumbents. Ru et al.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Tyagi (1999) found that the entry of a new downstream retailer benefits the incumbent retailers, and Arya et al (2007) showed that the downstream retailer could be better off when the upstream supplier opens up a direct channel. Thomadsen (2012) found that the competitor's product line expansion sometimes benefits the incumbent firm, and Pazgal et al (2016) showed that all incumbent firms could be better off after the entry of a new competitor, which only competes with one of the incumbents. Ru et al (2015) found that the store-brand introduction of the retailer can benefit the manufacturer of a competing national-brand in the retailer-led supply chain where the retailer has the first-mover advantage.…”

Section: Literature Reviewmentioning

confidence: 99%

The bright side of third‐party marketplaces in retailing

Zheng

2021

Int Trans Operational Res

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A prevalent practice for retailers is to provide a marketplace for third‐party sellers (3P sellers) to sell products directly to consumers, charging the sellers a commission fee. This study investigates the downstream retailer's optimal strategy to introduce a 3P seller who sells a substitutable product. We develop a game‐theoretic model, through which our first result shows that the retailer introduces a 3P seller only when the marginal costs of the products are in a medium range. Second, the retailer's strategy of introducing a 3P seller may benefit the manufacturer, even though the introduction creates downstream competition that may reduce the sales of the manufacturer's product. This happens because the strategy of introducing a 3P seller can mitigate the double marginalization between the manufacturer and retailer. In contrast to the conventional wisdom that introducing a 3P seller always results in a “win–lose” outcome for the retailer and manufacturer, we derive evidence that introducing a 3P seller can lead to a “win‐win” outcome for the retailer and manufacturer and thus improve the channel performance. Lastly, we find that the retailer's 3P seller introduction strategy can also improve the consumer surplus because this strategy increases competition.

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“…The majority of the literature examines the inverse relationship from the perspective of consumer exit. The model of Pazgal, Soberman, and Thomadsen (2013) is closely related to ours, which examines the positive effect of costumer exit on profit in a horizontally differentiated market. They demonstrated that the departure of the consumers at the market edges can enhance the retailers' profitability.…”

Section: Inverse Relationship Between Consumer Size and Profitmentioning

confidence: 99%

“…Second, we contribute to the literature on profit-increasing consumer exit (e.g., Coughlan and Soberman 2005;Ishibashi and Matsushima 2009;Pazgal, Soberman, andThomadsen 2013, 2016). The stream of literature essentially examines the inverse relationship between consumer size and firm profit.…”

Section: Introductionmentioning

confidence: 99%