THE IMPACT OF AN INTERNET SHOPPING INFOMEDIARY ON CHANNEL COMPETITION WITH MULTIPLE BRANDS

This paper builds a game-theoretic model to examine the impact of the Internet shopping infomediary on the competition between the product or service supplier’s direct online channel and the independent online multi-brand retailer. It is found that by facilitating cross-channel competition, the infomediary may even help the supplier to place its brand on the retailer’s shelf. The main insight is that when competing with the supplier’s direct channel, the independent retailer may prefer to engage in inter-brand competition (i.e., to promote the competitive substitute brand). In this case, the retailer may decline to carry the supplier’s brand to avoid direct competition with the direct channel over the same brand. However, by joining an infomediary, the supplier can make its direct channel more competitive and limit the retailer’s strategic benefit from the inter-brand competition. This may increase the possibility that the retailer gives up the inter-brand competition and agrees to carry the supplier’s brand.