Anastasiia Parakhonyak, Toulouse School of Economics – Københavns Universitet

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Anastasiia Parakhonyak, Toulouse School of Economics

"Showrooming in a market of tangible goods with heterogeneous agents"


Showrooming is a situation when consumers try products at brick-and-mortar stores before purchasing them online at a lower price. A price matching policy is often considered to be a tool for stopping showrooming. We show that price-matching is indeed a part of the equilibrium when search costs are low, however this fully stops online purchases and directs all the sales to brick-and-mortar stores. For higher search cost price-matching is suboptimal, and online and offline purchases coexist with showrooming. Nevertheless, price-matching commitment can be used for avoiding a hold-up problem in the situation when the  firm cannot commit to both online and in-store prices. A firm which faces an online competition with a foreign multichannel retailer has an incentive to geo-block, i.e. to refuse to serve foreign customers, even though it leads to a decrease of the potential demand. Non-discrimination price policy, which requires multichannel distribution retailers to charge equal prices in different distribution channels, helps to eliminate incentives to geo-block and thus restores online competition.

Contact person: Peter Norman Sørensen