Title: Effects of consumer online purchase costs on online and traditional retailers

Authors: Ruiliang Yan, John Wang

Addresses: School of Business and Economics, Indiana University Northwest, Gary, IN 46408, USA. ' Department of Management and Information Systems, Montclair State University, Montclair, NJ 07043, USA

Abstract: Our research provides a useful framework to help business marketers identify the effect of consumer online purchase costs on firm performances in online and traditional channel competition. A game theory model is developed to determine the optimal strategies for online and traditional retailers. We demonstrate that consumer online purchase costs always have a valuable impact on firm profits, and further show that consumer online purchase costs always have a much more valuable impact on firm profits whenever the traditional retail transaction costs and the product web-fit change. We also find that consumer online purchase costs have a greater impact on the retailer|s profits in a Stackelberg competitive system than in a Bertrand competitive system. Based on our results, managerial implications are discussed and probable paths of future research are identified.

Keywords: online consumers; online purchase costs; distribution channels; game theory; marketing strategies; online retailing; e-tailing; online shopping; online purchasing; profits; e-shopping; electronic shopping; e-purchasing; electronic purchasing.

DOI: 10.1504/IJBSR.2009.026188

International Journal of Business and Systems Research, 2009 Vol.3 No.3, pp.351 - 371

Available online: 27 May 2009 *

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