Although electronic commerce is regarded as a revolution that has transformed the structure of business and the mechanisms of economic systems, research on price competition and strategic behaviors in electronic commerce has been conducted through empirical approaches, yielding conflicting results. Considering the development of technologies supporting electronic commerce, there have been few analytical analyses. In addition, the few existing analytical analyses have not addressed competition behaviors and strategic implications in complex business environments, where conventional offline firms and Internet firms coexist. Also, previous empirical analyses have focused on where products are priced higher (or lower) rather than finding reasons for those differences. This paper analyzes pricing strategies between conventional offline firms and online firms through a theoretical approach and empirical analysis, and draw some strategic implications with some remarks related to welfare aspects. Especially, the empirical study analyzes whether factors such as the size of market and product characteristics are related to price differences between offline and online channels through statistically testing the main results of the analytical analysis rather than just finding which products are higher in prices depending on channels. (c) 2004 Elsevier B.V. All rights reserved.