Prominent Retailer and Intrabrand Competition

Ruitong Wang, Yi Zhu, George John

Research output: Contribution to journalArticlepeer-review

Abstract

Online retail search traffic is often concentrated at a “prominent” retailer for a product. The authors unpack the ramifications of this pattern on pricing, profit, and consumer welfare in an intrabrand setting. Prominence denotes a larger number of heterogenous-search-cost consumers starting their search at the prominent retailer than at any other retailer. These analyses show that search traffic concentration can intensify intrabrand competition, lower average prices of all retailers, and improve consumer welfare. Interestingly, the prominent retailer's incremental traffic advantage can increase or reduce its own profit; the authors denote these as the “blessing” and “curse” of prominence, respectively. The authors extend their analysis to a setting where consumers consider searching only among those retailers they are individually aware of; the prominent retailer is included in all these individual awareness sets. The effects on market average prices and welfare carry over, but only below a critical threshold level of the prominent retailer's first-search traffic advantage. Above this threshold, market average prices rise and welfare decreases, making this the region where search concentration warrants scrutiny from policy makers. The authors close with policy remedies and managerial implications of search concentration.

Original languageEnglish (US)
JournalJournal of Marketing Research
DOIs
StateAccepted/In press - 2021

Bibliographical note

Funding Information:
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Yi Zhu acknowledges financial support from the National Natural Science Foundation of China (#71832008) and from 3M (Nontenured Faculty Grant, Carlson School of Management).

Publisher Copyright:
© American Marketing Association 2021.

Keywords

  • competitive strategy
  • curse of prominence
  • digital markets
  • intrabrand competition
  • ordered search
  • search cost heterogeneity
  • search traffic concentration

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