Research on Equilibrium Retail Prices Between On-Line and In-Store Channels Based on Linear Model

Information technology and e-commerce are the most representative phenomena of this time, compared with traditional brick-and-mortar, the Internet can easily make retail enterprises reach potential consumers. In this paper, two types of channel distributions are suggested for single retailer. One is on-line sale, which is considered as a general tendency of the times, and the other is traditional in-store sale. The retailer faces the decision what would equilibrium retail prices be between the two retail channels? We present a theoretical model in which a single retailer sell a single product through online or in-store. The expected profit functions for these strategies are formulated and evaluated by assumptions about market share. In particular, we do this by analyzing a linear demand function. Based on these conditions, the optimal retail price is determined. In conclusion, the results indicate channel price strategy that guarantees the maximum profits of retailer.