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Many consumer durable retailers often do not advertise their prices and instead ask consumers to call them for prices. It is easy to see that this practice increases the consumers' cost of learning the prices of products they are considering, yet firms commonly use such practices. Not advertising prices may reduce the firm's advertising costs, but the strategic effects of doing so are not clear. Our objective is to examine the strategic effects of this practice. In particular, how does making price discovery more difficult for consumers affect competing retailers' price, service decisions, and profits?We develop a model in which a manufacturer sells its product through a high-service retailer and a lowservice retailer. Consumers can purchase the retail service at the high-end retailer and purchase the product at the competing low-end retailer. Therefore, the high-end retailer faces a free-riding problem. A retailer first chooses its optimal service levels. Then, it chooses its optimal price levels. Finally, a retailer decides whether to advertise its prices. The model results in four structures: (1) both retailers advertise prices, (2) only the low-service retailer advertises price, (3) only the high-service retailer advertises price, and (4) neither retailer advertises price.We find that when a retailer does not advertise its price and makes price discovery more difficult for consumers, the competition between the retailers is less intense. However, the retailer is forced to charge a lower price. In addition, if the competing retailer does advertise its prices, then the competing retailer enjoys higher profit margins. We identify conditions under which each of the above four structures is an equilibrium and show that a low-service retailer not advertising its price is a more likely outcome than a high-service retailer doing so. We then solve the manufacturer's problem and find that there are several instances when a retailer's advertising decisions are different from what the manufacturer would want. We describe the nature of this channel coordination problem and identify some solutions.

The authors also thank the JMR review team for the constructive feedback. John Hauser served as associate editor for this article.

We develop a model to investigate the manner in which the pricing, profitability, and protection strategies of a seller of a proprietary digital good respond to changing market conditions. Specifically, we investigate how product piracy and the presence of open source software alternatives (such as Open Office) impact the optimal strategy of a seller of proprietary software (such as Microsoft Office). In contrast to previous literature, we show that firms may make more (rather than less) effort to control piracy when network externalities are strong. In addition, we show that the level of network externalities amplifies losses incurred by an incumbent due to high-quality pirated goods. Therefore, for products characterized by high network externalities (such as software), sellers need to try to maintain a large perceived quality gap between their product and illegal copies. Further, we demonstrate that the appearance of an OSS alternative leads the incumbent to reduce both price and the level of piracy control. Although high-quality pirated goods are detrimental to profits in the absence of OSS, they may actually limit the incumbent's losses and the need to adjust price and protection strategies due to the introduction of an OSS alternative. Thus, an incumbent may find it easier to compete with OSS in the presence of product piracy. Finally, highly correlated intrinsic valuation between an incumbent and OSS products require smaller adjustments to price and piracy controls and leads to muted impact on incumbent profit.

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