| Summary: | 碩士 === 國立臺灣大學 === 商學研究所 === 92 === This paper uses a game-theoretic model to analyze the impacts of the Internet channel on the product differentiation and pricing strategies of two competing firms. Product differentiation raises the valuation of some consumers, thus allowing firms to raise the prices of their products, while at the same time may force firms to give up those consumer who do not appreciate the differentiated products. After the emergence of the Internet, product differentiation prevents firms to engage in intense price competition on the Internet; furthermore, consumers who are located in different areas but with similar preferences can be induced to purchase their preferred differentiated products on the Net. Under the assumption that consumers differ in their capability of accessing the Internet and in their locations, we find that in the presence of the Internet, (i)the higher the proportion of Internet users, the more likely it is that product differentiation can soften the competition between firms; (ii)social welfare may decrease with product differentiation; (iii)when consumers have a higher cost of traveling to another trading area, the extent that the profits of firms after differentiation depend on his rival’s Internet users is also higher.
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