Competitors or frenemies? Strategic investment between competing channels

It is increasingly common for an online retailer to invest in a competitor offline retailer, or vice versa. In order to identify the conditions under which this type of cross-investment in a competitor is attractive, the authors develop a duopoly model with an e-tailer and a brick-and-mortar (BM) retailer, and ask when, or whether, one member of the duopoly should invest in the other. The impact of the investment decision on the duopoly’s leadership structure, prices, demands, and profits are investigated. Their study shows that the investor chooses to invest in the investee when the investee’s value is medium; the investment can weaken the price competition between the two channels, and lead to a win-win outcome. When there is no cross-channel investment, the member of the duopoly that is more efficient in selling the product should take the leadership role by setting the selling price first. When one member of the duopoly does decide to invest in the other, however, the leadership decision depends strongly on the relative initial values of the two retailers. Finally, they show that when the initial value of the investee as estimated by the investor is sufficiently low, and the customer’s degree of acceptance of the e-tailer’s channel is sufficiently high, the investor prefers to be an investment holder; otherwise, the investor prefers to receive a dividend.

• Record URL:
  • https://doi.org/10.1016/j.tre.2022.102784
• Record URL:
  • http://www.sciencedirect.com/science/article/pii/S1366554522001740
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/13665545
• Supplemental Notes:
  • © 2022 Elsevier Ltd. All rights reserved. Abstract reprinted with permission of Elsevier.
• Authors:
  • Yan, Nina
  • Liu, Yang
  • Chen, Jing
• Publication Date: 2022-8

Language

• English

Media Info

• Media Type: Web
• Features: Appendices; Figures; References; Tables;
• Pagination: 102784
• Serial:
  • Transportation Research Part E: Logistics and Transportation Review
  • Volume: 164
  • Issue Number: 0
  • Publisher: Elsevier
  • ISSN: 1366-5545
  • Serial URL: http://www.sciencedirect.com/science/journal/13665545

Subject/Index Terms

• TRT Terms: Business practices; Competition; Electronic commerce; Forecasting; Investments; Leadership; Retail trade
• Subject Areas: Finance; Freight Transportation; Planning and Forecasting;

Filing Info

• Accession Number: 01850245
• Record Type: Publication
• Files: TRIS
• Created Date: Jun 27 2022 5:19PM