Show simple item record Desai, PS Krishnamoorthy, A Sainam, P 2011-06-21T17:30:59Z 2010-01-01
dc.identifier.citation Marketing Science, 2010, 29 (1), pp. 158 - 174
dc.identifier.issn 0732-2399
dc.description.abstract Many consumer durable retailers often do not advertise their prices and instead ask consumers to call them for prices. It is easy to see that this practice increases the consumers' cost of learning the prices of products they are considering, yet firms commonly use such practices. Not advertising prices may reduce the firm's advertising costs, but the strategic effects of doing so are not clear. Our objective is to examine the strategic effects of this practice. In particular, how does making price discovery more difficult for consumers affect competing retailers' price, service decisions, and profits? We develop a model in which a manufacturer sells its product through a high-service retailer and a low-service retailer. Consumers can purchase the retail service at the high-end retailer and purchase the product at the competing low-end retailer. Therefore, the high-end retailer faces a free-riding problem. A retailer first chooses its optimal service levels. Then, it chooses its optimal price levels. Finally, a retailer decides whether to advertise its prices. The model results in four structures: (1) both retailers advertise prices, (2) only the low-service retailer advertises price, (3) only the high-service retailer advertises price, and (4) neither retailer advertises price. We find that when a retailer does not advertise its price and makes price discovery more difficult for consumers, the competition between the retailers is less intense. However, the retailer is forced to charge a lower price. In addition, if the competing retailer does advertise its prices, then the competing retailer enjoys higher profit margins. We identify conditions under which each of the above four structures is an equilibrium and show that a low-service retailer not advertising its price is a more likely outcome than a high-service retailer doing so. We then solve the manufacturer's problem and find that there are several instances when a retailer's advertising decisions are different from what the manufacturer would want. We describe the nature of this channel coordination problem and identify some solutions. © 2010 INFORMS.
dc.format.extent 158 - 174
dc.language.iso en_US en_US
dc.relation.ispartof Marketing Science
dc.relation.isversionof 10.1287/mksc.1090.0498
dc.title "Call for prices": Strategic implications of raising consumers' costs
dc.title.alternative en_US
dc.type Journal Article
dc.description.version Version of Record en_US 2010-2-jan en_US
duke.description.endpage 174 en_US
duke.description.issue 1 en_US
duke.description.startpage 158 en_US
duke.description.volume 29 en_US
dc.relation.journal Marketing Science en_US
pubs.issue 1
pubs.organisational-group /Duke
pubs.organisational-group /Duke/Fuqua School of Business
pubs.publication-status Published
pubs.volume 29
dc.identifier.eissn 1526-548X

Files in this item

This item appears in the following Collection(s)

Show simple item record