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Conventional markets vs. online markets: brand effects and entry decisions
by Gokce Kurucu
International Journal of Electronic Business (IJEB), Vol. 13, No. 4, 2017
Abstract: Why did conventional retailers with established brands hesitate to enter online markets for a substantial period of time? I model the entry decision of a conventional firm as a dilemma: a firm's early entry to the online market would increase that market's popularity and, as a result, shift the demand for the product from the conventional market to the online market. On the other hand, a firm's failure to enter the online market early will allow the competing online firm to increase its brand value due to the increase in demand for its online product. The results show that given the take-off probability - the probability that the popularity of the online market will increase - a conventional firm will delay its entry into the online market whenever brand effects are not substantial, to protect its profits in the monopolistic conventional market.
Online publication date: Wed, 16-Aug-2017
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