An analysis of price strategies with price matching in the presence of showrooming

Abstract

Abstract With multi‐channel retail competition, some offline retailers implement price matching services to combat consumers’ showrooming behavior. With this service, offline retailers cut their prices to match the online price if it is lower. In this paper, we establish a game model that involves an offline and online retailer in the presence of showrooming to analyze the impact of price matching. Specifically, we capture consumers’ uncertainty of product value and heterogeneous awareness of price matching and assume that the online retailer provides a free return policy. The results indicate that price matching alleviates showrooming and relaxes competition. Moreover, we find that the online retailer adopts a randomized pricing strategy if the offline visiting cost is moderate. We further show that the price matching strategy does not necessarily benefit offline retailers and hurt online retailers. Subsequently, we identify the offline retailers’ optimal conditions for implementing price matching.

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