Strategic interplay between store brand introduction and online direct channel introduction

This paper investigates the strategic interplay between a national brand manufacturer and a retailer in introducing an online direct channel and a store brand by constructing a game-theoretic model that incorporates the firms' channel and brand strategies. We show that at equilibrium, the store brand is introduced but the online direct channel may or may not be introduced. Interestingly, the firms may be trapped in a prisoner's dilemma when they choose to introduce the online direct channel and store brand. The online direct channel may be introduced if the store brand has been introduced; otherwise it may not be introduced.