Agnieszka Wolk and Christine Ebling

Price differentiation has long been recognized as a strategy that companies can use to increase profits when consumers’ tastes and valuations of a good differ. In two studies, the online and offline prices of 115 retailers in diverse industries and retail stores in a major German city were monitored. Both studies revealed that multi-channel retailers engage in channel-based price differentiation. The extent and direction of price differentiation fluctuated according to retailer and product category. A greater number of retailers consistently charge more in offline than in online contexts than vice versa, but most companies pursue a mixed strategy. The observed price gap of 12-16 is rather low compared to other types of self-selection price differentiation such as quantity-based price differentiation or quality-based price differentiation. The findings further indicate that a higher level of online competition online does not necessarily lead to lower prices in the online channel.