Price timing in new markets with strategic consumers

Abstract

We analyse the competitive price timing decisions of both e-tailers (online sellers) and brick-mortar retailers for a new product. Firms may announce the price early (when the product's valuation for consumers is highly uncertain) or late (when the uncertainty of the product's valuation has been resolved). Both firms choose the timing and price level to maximise their own expected profits. We find that firms always choose to announce the price late when they monopoly the market. However, when both firms compete against each other and duopoly the market, both firms announce the price late when the uncertainty of the product's valuation is high and the online acceptance rate is low; by contrast, one of them takes a leadership role and announces the price early whereas the other one follows and announces late when the uncertainty of the product's valuation is low and the online acceptance rate is high.