The Effects of a 'No-Haggle' Channel on Marketing Strategies

46 Pages Posted: 15 Jun 2014

See all articles by Xiaohua Zeng

Xiaohua Zeng

City University of Hong Kong (CityU)

Srabana Dasgupta

Simon Fraser University (SFU)

Charles Weinberg

University of British Columbia (UBC)

Date Written: April 21, 2014

Abstract

As sellers increasingly turn to multi-channel retailing, the opportunity to implement different pricing policies has grown. With the advent of the internet, many traditionally bargained products such as automobiles, jewelry, watches, appliances and furniture are now being offered online at a fixed pre-determined price. We explore the strategy of simultaneously offering two pricing formats (fixed and bargained) via two different channels (online and brick and mortar) and find that in a market where there are two types of consumers — those with a high cost of haggling and others with a lower cost — a dual-pricing strategy is optimal only when there are enough high haggling-cost consumers, but not too many, and when the haggling costs between the two types of consumers are sufficiently different. We also find that it is optimal for the seller to specify a higher-than-cost minimum acceptable price as the price floor of bargaining. By doing so, the seller increases the bargained price by complementing the salesperson’s bargaining ability, and also softens the internal competition between the two channels. Finally, we find that, surprisingly, the dual-pricing strategy may serve fewer customers while still being more profitable than a single price structure. The implications for consumer surplus are also explored.

Keywords: channel relationships, pricing, bargaining

JEL Classification: M31, L11

Suggested Citation

Zeng, Xiaohua and Dasgupta, Srabana and Weinberg, Charles, The Effects of a 'No-Haggle' Channel on Marketing Strategies (April 21, 2014). Available at SSRN: https://ssrn.com/abstract=2449307 or http://dx.doi.org/10.2139/ssrn.2449307

Xiaohua Zeng (Contact Author)

City University of Hong Kong (CityU) ( email )

Department of Marketing
Kowloon Tong
Hong Kong

Srabana Dasgupta

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Charles Weinberg

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

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