TY - JOUR
T1 - Pricing and supply priority in a dual-channel supply chain
AU - Xiao, Tiaojun
AU - Shi, Jim
N1 - Funding Information:
The authors would like to thank the editor, two anonymous referees, and Yusen Xia at Georgia State University for their valuable suggestions and insightful comments that have significantly improved the presentation of this paper. This research was supported in part by: (i) China National Funds for Distinguished Young Scientists under Grant 71425001 ; and (ii) the National Natural Science Foundation of China under Grant 71371093 . The second author gratefully acknowledges the support for this research project from NJIT.
PY - 2016/11/1
Y1 - 2016/11/1
N2 - This paper studies a manufacturer marketing a product through a dual-channel supply chain, comprised of an online channel and a brick-and-mortar retail channel. In particular, we consider the pricing and channel priority strategies of dual-channel supply chain in the presence of supply shortage caused by random yields. To this end, we develop game theoretic models to investigate the price decisions and the channel priority strategy, as well as examine the impacts of channel coordination and the time sequence of decisions, i.e., ex-ante and ex-post production yield, on the channel priority strategy. While encountered with a potential supply shortage, the manufacturer has two channel-allocation priority strategies: direct channel priority and retail channel priority. Our study shows that: (i) coordination of the dual-channel supply chain can alleviate the retailer's complaint of insufficient supply; (ii) counter-intuitively, the retail channel priority is adopted only when the total surplus in the retail channel is low in the decentralized setting; and (iii) the effect of the unit cost of sales of the direct channel on the motivation to use retail channel priority depends on the effect of channel priority on the demand. In addition, we find that the main results of pricing and channel priority strategies remain robust to the time sequence of channel priority decision (yield ex-ante or ex-post).
AB - This paper studies a manufacturer marketing a product through a dual-channel supply chain, comprised of an online channel and a brick-and-mortar retail channel. In particular, we consider the pricing and channel priority strategies of dual-channel supply chain in the presence of supply shortage caused by random yields. To this end, we develop game theoretic models to investigate the price decisions and the channel priority strategy, as well as examine the impacts of channel coordination and the time sequence of decisions, i.e., ex-ante and ex-post production yield, on the channel priority strategy. While encountered with a potential supply shortage, the manufacturer has two channel-allocation priority strategies: direct channel priority and retail channel priority. Our study shows that: (i) coordination of the dual-channel supply chain can alleviate the retailer's complaint of insufficient supply; (ii) counter-intuitively, the retail channel priority is adopted only when the total surplus in the retail channel is low in the decentralized setting; and (iii) the effect of the unit cost of sales of the direct channel on the motivation to use retail channel priority depends on the effect of channel priority on the demand. In addition, we find that the main results of pricing and channel priority strategies remain robust to the time sequence of channel priority decision (yield ex-ante or ex-post).
KW - Game theory
KW - Random yield
KW - Supply chain management
KW - Supply shortage
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U2 - 10.1016/j.ejor.2016.04.018
DO - 10.1016/j.ejor.2016.04.018
M3 - Article
AN - SCOPUS:84992303557
SN - 0377-2217
VL - 254
SP - 813
EP - 823
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 3
ER -