Title: An application of game theory to shape e-tailing strategies

Authors: Min-Young Lee

Addresses: Department of Merchandising, Apparel and Textiles, College of Agriculture, University of Kentucky, 308 Erikson Hall, Lexington, KY 40506, USA

Abstract: Game theory has been applied to a variety of retail business decisions (e.g., positioning of retail store brands, retail promotion, and retail channel management); however, few retailers have applied game theory for strategic decision-making. This study presents e-tailing issues (i.e., pricing strategy, privacy and security in e-commerce, and investment web-based channel) that can be approached with three well-known strategic games: 1) Prisoner|s dilemma; 2) Tragedy of the common; 3) Boxed pigs. The main idea and the framework of this study are adopted from Mudambi|s study, which applied game theory to retail issues in 1996. Since then, however, the retail landscape has changed dramatically and e-commerce has emerged to play an important role in the market. To this end, it is necessary to examine the e-commerce market using game theory. This study developed propositions that help e-tailers| strategic decisions that can be explained by different games.

Keywords: online retailing; pricing strategies; security; e-commerce; game theory; multichannel strategies; electronic commerce; e-tailing; business decisions; brand positioning; retail stores; store brands; retail promotions; retail channel management; retailers; decision making; pricing strategies; privacy; investment channels; internet; world wide web; strategic games; prisoner|s dilemma; tragedy of the common; boxed pigs; Ram Mudambi; e-tailers; electronic marketing; e-marketing; electronic retailing; e-retailing.

DOI: 10.1504/IJEMR.2011.039896

International Journal of Electronic Marketing and Retailing, 2011 Vol.4 No.1, pp.49 - 61

Published online: 21 Oct 2014 *

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