A Multichannel Model of Separating Equilibrium in the Face of the Digital Divide

Authors:
Frederick J. Riggins
Affiliations:
Department of Information and Decision Sciences of the Carlson School of Management at the University of Minnesota
Venue:
Journal of Management Information Systems
Year:
2004

Citing 2
Cited 7

Optimal price skimming by a monopolist facing rational consumers

Management Science
Market segmentation, cannibalization, and the timing of product introductions

Management Science

Second opinions and online consultations

Decision Support Systems
Internet channel entry: retail coverage and entry cost advantage

Information Technology and Management
Optimal Multi-Channel Delivery of Expertise: An Economic Analysis

International Journal of Electronic Commerce
Manufacturers' Distribution Strategy in the Presence of the Electronic Channel

Journal of Management Information Systems
An Integrated Model of Consortium-Based E-Business Standardization: Collaborative Development and Adoption with Network Externalities

Journal of Management Information Systems
A Hybrid Firm's Pricing Strategy in Electronic Commerce Under Channel Migration

International Journal of Electronic Commerce
Intertemporal Movie Distribution: Versioning When Customers Can Buy Both Versions

Marketing Science

Quantified Score

Hi-index	0.00

Visualization

Abstract

We develop a multichannel model of separating equilibrium where a seller markets a durable good to high- and low-type consumers in two different chan-nels--an online Internet storefront and an offline bricks-and-mortar store. We show how the digital divide, where high-type consumers dominate the online channel and low-type consumers dominate the offline channel, artificially segments the marketplace, thereby mitigating the classic cannibalization problem. This allows the seller to more efficiently market its goods to each consumer segment. We show conditions under which low-type consumers are initially served in the offline channel, but subsequently bridging the divide results in their not being served in either channel. We also examine the implications of bridging the digital divide when the seller uses delay by engaging in intertemporal price discrimination.