In this paper, the authors explore the consequences of showrooming and price matching strategy to combat showrooming under the consideration that brick-and-mortar (BM) stores and online retailers hold different costs.
The authors use a duopoly model to analyze the impact of showrooming behavior on competition between a BM store and an online retailer with different types of customers and different costs. Then, they consider the price matching strategy that a BM store could employ to combat showrooming and explore the effect of such a strategy.
Showrooming behavior is detrimental to the profit of the BM store, and the online retailer suffers a loss of their profit unless the relative cost of the BM store is high and only part of the customers exhibit showrooming behavior. As the fraction of customers who seek price matching increases, profits of both the BM store and the online retailer initially decrease and then may increase, even if there is no showrooming.
Unlike existing studies that ignore different costs between online and offline retailers, the authors set different costs between the BM store and the online retailer to consider the effects of showrooming and price matching strategy.
