This study aims to describe the general picture of the competition in multichannel expert services in duopoly market and discuss how the quality difference may affects the competition between service providers with different quality levels, where both providers offer face-to-face channel and one of providers offers online channel additionally and service quality that consumers have heterogeneous preferences for is vertically differentiated. These results can be used to determine which service providers should offer online expert services and understand the competition in multichannel expert services in duopoly.
This paper uses the stylized vertical differentiation model to investigate the role of quality in expert services market, assuming that two services providers offer the same services with different quality levels and one of them having additional online services. Taking into account the differences of services from products and the particularity of online service, this paper extends the vertical differentiation model to expert services market.
The quality difference is the key factor in the competition of expert services. Service prices and the profits of providers, independent of the quality levels, are positively related to the quality difference, whereas the demand of online services is in the opposite direction regardless of which provider offers online channel. It demonstrates that provider with low-quality level should open online channel from the point of view of social welfare if it is closely related to the expert services, even though any provider can make more profits by opening online channel.
This extended vertical differentiation model, taking into account the importance of vertical differentiation in expert service, ignores the horizontal differentiation. More accurate strategies for multichannel expert services providers with what level of the quality a provider should offer is needed in future work. Moreover, this paper does not consider the different waiting costs of consumers in face-to-face channel and assumes that their problem will be solved eventually.
To the best of the author’s knowledge, no study has focused on the quality difference in multichannel expert services market or discussed how to offer online expert services in the duopoly market. This study extends the vertical differentiation model to the multichannel expert service market. Therefore, it fills this research gap and extends research to expert services market in the new network environment, aiming to help understand the competition in multichannel expert services.
