Pricing Strategies in Dual‐Channel Supply Chain with a Fair Caring Retailer

Abstract

Manufacturers add online direct channels that inevitably engage in channel competition with offline retail channels. Since price is an important factor in consumers' choice of purchasing channel, pricing strategy has become a popular topic for research on dual-channel competition and coordination. In contrast to previous research on pricing strategies based on the full rationality of members, we focus on the impact of retailers' fairness concerns on pricing strategies. In this study, the hybrid dual-channel supply chain consists of one manufacturer with a direct channel who acts as the leader and a retailer who acts as the follower. First, we use the Stackelberg game approach to determine the equilibrium pricing strategy for a fair caring retailer. Simultaneously, we consider a centralized dual-channel supply chain as the benchmark for a comparative analysis of the efficiency of a decentralized supply chain. Furthermore, we study pricing strategies when the retailer has fairness concerns and determine the complete equilibrium solutions for different ranges of the parameters representing cross-price sensitivity and fairness. Finally, through numerical experiments, the pricing strategies, the profit and utility of the manufacturer and retailer, and the channel efficiency of the supply chain are compared and analysed for two scenarios. We find that fairness concerns reduce the manufacturer's profits, while for the most part, the retailers’ profit can be improved; however, the supply chain cannot achieve complete coordination.

Inventory and Ordering Decisions in Dual‐Channel Supply Chains Involving Free Riding and Consumer Switching Behavior with Supply Chain Financing

“…Ding et al [28] investigated the decision-making process of hierarchical pricing in different channel models and obtained the joint optimization strategy of offline retailer's sales price, online manufacturer's sales price, and wholesale price. Dai et al [29] investigated the impact of retailers' fair concerning on the pricing decisions of the manufacture and the retailer by establishing the dualchannel supply chain model. Wang et al [30] considered the sales effort and third-party product recovery, researched the optimal pricing of retail channel and direct channel of the dual-channel supply chain.…”

Complexity Analysis of Pricing in a Multichannel Supply Chain with Spillovers from Online to Offline Sales

“…As mentioned above, the equilibrium E * is locally asymptotically stable only when the three inequalities in (19) hold simultaneously. According to the nonlinear dynamic system theory, the equilibrium will lose its stability if any one of them changes from an inequality to an equality with the other two remaining unchanged [37,38].…”

“…In addition, it is necessary to explore the different profit distributions among participants if e-tailers allow manufacturers to directly have an access to their online consumers, which is related to the topic of supply chain coordination, and this topic has attracted significant academic interest (e.g., [17][18][19][20][21][22][23]). Players can coordinate the supply chain through a variety of mechanisms, such as twopart tariff contract, rebate contract, quantity discounts contract, and revenue-sharing contract, among which revenue-sharing contract has been universally applied in industries and widely explored by researchers.…”

Pricing Strategies in a Two-Echelon Supply Chain With Sales Efforts and Channel Conflicts

“…Some schoolers consider the price strategies for supply chains. For the product quality of a dual-channel supply chain, Dai et al [18] and Ke et al [19] investigate price problem of dual-channel supply chain facing supply members with characteristic of fair caring and certain belief degrees. Chen et al [20] observe the impact of product quality in dual-channel supply chains and they believe that high quality of product promotes the profit seeking the increase of profit.…”