A Quality - Price Competition Between Manufacturers Based on Showroom

This paper divided consumers into high level and low level informed consumers based on information interaction, then established the utility function for each consumer. Subsequently, it analyzed the Bertrand game between two manufacturers about whether to open the showrooms and their corresponding quality-price strategies after opening the showrooms. The results show that both manufactures would open showrooms when low level informed consumers have a low trust degree of online products, meanwhile their optimal prices and quality will increase, but both manufacturers would get the least profits and trapped into Prisoner's Dilemma. While under the condition of low level informed consumers with high trust degree of online products, both manufacturers will choose not to open showrooms, and both parties achieve Pareto optimality. And when their trust degree is medium or partial, both manufactures would open showrooms or choose not to open showrooms, which are related to the percentage of low level informed consumers.