The Internet with the increasing importance makes everything changes. And this rapid development of the Internet gives firms a new way of doing their business and urges them to response more actively to adapt these new changes. This thesis investigates some issue of multiple channel competition in the Internet environment, and suggests a new modeling approach for analyzing the online and offline channels competing each other.
First, by modeling a situation when just one retailer and one direct marketer compete in the market, I found that the product price increases as the distance cost of the other channel increases. And I found that the channel can charge greater price than the other if the distance cost of the other channel is more expensive.
Second, by modeling a situation when one more channel member comes in this market, I found that the price, market share, and profit of the new channel member decrease as the degree of differentiation is more negative to the company and the risk of the Internet increases especially when they come in as a direct marketer.
In conclusion, I suggest that firms should consider which is more profitable using their degree of differentiation and the Internet risk if they want to enter the market as either a traditional retailer or a direct marketer.