Figure 1.
Channel structures of dual-channel retailers
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May
2022, 18(3): 2049-2076.
doi: 10.3934/jimo.2021056
The optimal pricing and service strategies of a dual-channel retailer under free riding
| 1. | Business School, Henan Normal University, Xinxiang 453007, China |
| 2. | School of Business Administration, South China University of Technology, , Guangzhou 510640, China |
| 3. | Business School, Shantou University, Shantou 515063, China |
| 4. | Research Institute of Innovation Competitiveness of Guangdong, HongKong and Macao Bay Area, Guangdong University of Finance and Economics, Guangzhou 510320, China |
Free riding refers to that in a multi-channel market, consumers enjoy the presale service of a product at one channel but purchase the product at another channel. In this paper, we study the optimal pricing and service strategies for a dual-channel retailer, who sells a product through both a traditional retail channel and an online channel. We assume that the offline channel provides the presale service but the online channel does not. We investigate how the changes of the degree of free riding affect the pricing/service strategies and profits of the two channels under three different scenarios: Stackelberg competition, Bertrand competition and channel integration. Our analysis shows that when the dual-channel retailer operates the two channels separately, no matter under which competitive scenario, free riding has a negative effect on both channels. And it is much more beneficial for the dual-channel retailer to let one channel work as a leader and another channel as a follower than to let the two channels make their decision simultaneous. In contrast, when the dual-channel retailer runs the two channels jointly, i.e., employs the channel-integration scenario, free riding may be beneficial to the retailer. Finally, this paper proposes and analyzes a revenue-sharing contract to coordinate a decentralized dual-channel retailer to achieve beneficial outcomes for both channels.
Mathematics Subject Classification:
Primary: 58F15, 58F17; Secondary: 53C35.
Citation:
Jinsen Guo, Yongwu Zhou, Baixun Li. The optimal pricing and service strategies of a dual-channel retailer under free riding. Journal of Industrial and Management Optimization,
2022, 18
(3)
: 2049-2076.
doi: 10.3934/jimo.2021056
![]()
References:
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K. D. Antia, M. Bergen and S. Dutta,
Competing with gray markets, MIT Sloan Management Review, 46 (2004), 63-69.
|
| [2] |
S. V. Baal and C. Dach,
Free riding and customer retention across retailers' channels, Journal of Interactive Marketing, 19 (2005), 75-85.
|
| [3] |
P. D. Berger, J. Lee and B. Weinberg,
Optimal cooperative advertising integration strategy for organizations adding a direct online channel, Journal of the operational research society, 57 (2006), 920-927.
|
| [4] |
F. Bernstein, J.-S. Song and X. Zheng,
Free riding in a multi-channel supply chain, Naval Res. Logist., 56 (2009), 745-765.
doi: 10.1002/nav.20379. |
| [5] |
D. W. Carlton and J. A. Chevalier,
Free riding and sales strategies for the Internet, Journal of Industrial Economics, 49 (2001), 441-461.
doi: 10.3386/w8067. |
| [6] |
T.-H. Chen,
Effects of the pricing and cooperative advertising policies in a two-echelon dual-channel supply chain, Computers & Industrial Engineering, 87 (2015), 250-259.
doi: 10.1016/j.cie.2015.05.013. |
| [7] |
S. C. Choi,
Price competition in a duopoly common retailer channel, Journal of retailing, 72 (1996), 117-134.
|
| [8] |
A. Cohen, When channel conflict is good, Sales and Marketing Management, 152 (2000), 13. |
| [9] |
B. Dan, C. Liu, G. Y. Xu and X. M. Zhang,
Pareto Improvement Strategy for Service-Based Free-Riding in a Dual-Channel Supply Chain, Asia-Pacific Journal of Operational Research, 31 (2014), 1-27.
|
| [10] |
R. Gulati and J. Garino,
Get the right mix of bricks and clicks, Harvard Business Review, 78 (2000), 107-117.
|
| [11] |
L. W. Hann, E-Commerce can create unexpected challenges, Best's Review, 99 (1999), 75. |
| [12] |
R. He, Y. Xiong and Z. Lin,
Carbon emissions in a dual channel closed loop supply chain: The impact of consumer free riding behavior, Journal of Cleaner Production, 134 (2016), 384-394.
doi: 10.1016/j.jclepro.2016.02.142. |
| [13] |
S. Heitz-Spahn,
Cross-channel free-riding consumer behavior in a multichannel environment: An investigation of shopping motives, sociodemographics and product categories, Journal of Retailing and Consumer Services, 20 (2013), 570-578.
doi: 10.1016/j.jretconser.2013.07.006. |
| [14] |
G. W. Hua, S. Y. Wang and T. C. E. Cheng,
Price and lead time decisions in dual-channel supply chains, European Journal of Operational Research, 205 (2010), 113-126.
|
| [15] |
L. Huang, X. H. Lu and S. L. Ba,
An empirical study of the cross-channel effects between web and mobile shopping channels, Information & Management, 53 (2016), 265-278.
|
| [16] |
S. Huang, C. Yang and H. Liu,
Pricing and production decisions in a dual-channel supply chain when production costs are disrupted, Economic Modelling, 30 (2013), 521-538.
|
| [17] |
W. Huang and J. M. Swaminathan,
Introduction of a second channel: Implications for pricing and profits, European Journal of Operational Research, 194 (2009), 258-279.
doi: 10.1016/j.ejor.2007.11.041. |
| [18] |
H. Ke and J. Liu,
Dual-channel supply chain competition with channel preference and sales effort under uncertain environment, Journal of Ambient Intelligence and Humanized Computing, 8 (2017), 781-795.
doi: 10.1007/s12652-017-0502-8. |
| [19] |
S. U. Kucuk and R. C. Maddux,
The role of the Internet on free-riding: An exploratory study of the wallpaper industry, Journal of Retailing and Consumer Services, 17 (2010), 313-320.
|
| [20] |
R. Lal and M. Sarvary,
When and how is the internet likely to decrease price competition?, Marketing Science, 18 (1999), 485-610.
doi: 10.1287/mksc.18.4.485. |
| [21] |
Q.-H. Li and B. Li,
Dual-channel supply chain equilibrium problems regarding retail services and fairness concerns, Appl. Math. Model., 40 (2016), 7349-7367.
doi: 10.1016/j.apm.2016.03.010. |
| [22] |
G. Li, L. Li and J. Sun,
Pricing and service effort strategy in a dual-channel supply chain with showrooming effect, Transportation Research Part E, 126 (2019), 32-48.
doi: 10.1016/j.tre.2019.03.019. |
| [23] |
W.-H. Liu, D. Xie and X.-C. Xu,
Quality supervision and coordination of logistic service supply chain under multi-period conditions, International Journal of Production Economics, 142 (2013), 353-361.
doi: 10.1016/j.ijpe.2012.12.011. |
| [24] |
L. Ma, F. Liu, S. Li and H. Yan,
Channel bargaining with risk-averse retailer, International Journal of Production Economics, 139 (2012), 155-167.
doi: 10.1016/j.ijpe.2010.08.016. |
| [25] |
R. A. Mittelstaedt,
Sasquatch, the abominable snowman, free riders and other elusive beings, Journal of Macromarketing, 6 (1986), 25-35.
doi: 10.1177/027614678600600206. |
| [26] |
Y. Moon, T. Yao and T. L. Friesz,
Dynamic pricing and inventory policies: A strategic analysis of dual channel supply chain design, Service Science, 2 (2010), 136-215.
doi: 10.1287/serv.2.3.196. |
| [27] |
S. K. Mukhopadhyay, X. W. Zhu and X. H. Yue,
Optimal contract Design for mixed channels under information asymmetry, Production and Operations Management, 17 (2008), 641-650.
|
| [28] |
X. Pu, L. Gong and X. Han,
Consumer free riding: Coordinating sales effort in a dual-channel supply chain, Electronic Commerce Research & Applications, 22 (2017), 1-12.
doi: 10.1016/j.elerap.2016.11.002. |
| [29] |
M. Radhi and G. Zhang,
Pricing policies for a dual-channel retailer with cross-channel returns, Computers & Industrial Engineering, 119 (2018), 63-75.
doi: 10.1016/j.cie.2018.03.020. |
| [30] |
M. Setak, H. K. Ahar and S. Alaei,
Coordination of information sharing and cooperative advertising in a decentralized supply chain with competing retailers considering free riding behavior, Journal of Industrial and Systems Engineering, 10 (2017), 151-168.
|
| [31] |
J. Shin,
How does free riding on customer service affect competition?, Marketing Science, 26 (2007), 488-503.
|
| [32] |
R. B. Singley and M. R. Williams,
Free riding in retail stores: An investigation of its perceived prevalence and costs, Journal of Marketing Theory and Practice, 2 (1995), 64-74.
doi: 10.1080/10696679.1995.11501685. |
| [33] |
F. Soleimani, A. Arshadi Khamseh and B. Naderi,
Optimal decisions in a dual-channel supply chain under simultaneous demand and production cost disruptions, Ann. Oper. Res., 243 (2016), 301-321.
doi: 10.1007/s10479-014-1675-6. |
| [34] |
Y. L. Tan and J. E. Carrillo,
Strategic analysis of the agency model for digital goods, Production and Operations Management, 26 (2017), 724-741.
doi: 10.1111/poms.12595. |
| [35] |
L. G. Telser,
Why should manufactures want fair trade?, Journal of Law and Economics, 3 (1960), 86-105.
|
| [36] |
J. Tirole, The Theory of Industrial Organization, Contributions to nonlinear functional analysis, MIT Press, 1988. |
| [37] |
A. A. Tsay and N. Agrawal,
Channel dynamics under price and service competition, Manufacturing & Service Operations Management, 2 (2000), 372-391.
doi: 10.1287/msom.2.4.372.12342. |
| [38] |
P. C. Verhoef, S. A. Neslin and B. Vroomen,
Multichannel customer management: Understanding the research-shopper phenomenon, International Journal of Research in Marketing, 24 (2007), 129-148.
|
| [39] |
J.-C. Wang, A.-M. Wang and Y.-Y. Wang,
Markup pricing strategies between a dominant retailer and competitive manufacturers, Computers & Industrial Engineering, 64 (2013), 235-246.
doi: 10.1016/j.cie.2012.09.009. |
| [40] |
K. L. Webb and N. M. Didow,
Understanding hybrid channel conflict: a conceptual model and propositions for research, Journal of Business-to-Business Marketing, 4 (1997), 39-78.
doi: 10.1300/J033v04n01_02. |
| [41] |
D. Wu, G. Ray, X. Geng and A. Whinston,
Implications of reduced search cost and free riding in e-commerce, Marketing Science, 23 (2004), 173-274.
doi: 10.1287/mksc.1040.0047. |
| [42] |
Y. Xia and S. M. Gilbert,
Strategic interactions between channel structure and demand enhancing services, European Journal of Operational Research, 181 (2007), 252-265.
doi: 10.1016/j.ejor.2006.06.027. |
| [43] |
D. H. Xing and T. M. Liu,
Sales effort free riding and coordination with price match and channel rebate, European Journal of Operational Research, 219 (2012), 264-271.
|
| [44] |
R. Yan,
Pricing strategy for companies with mixed online and traditional retailing distribution markets, Journal of Product & Brand Management, 17 (2008), 48-56.
doi: 10.1108/10610420810856512. |
| [45] |
R. Yan,
Product brand differentiation and dual-channel store performances of a multi-channel retailer, European Journal of Marketing, 44 (2010), 672-692.
doi: 10.1108/03090561011032324. |
| [46] |
R. Yan and Z. Pei,
The strategic value of cooperative advertising in the dual-channel competition, International Journal of Electronic Commerce, 19 (2015), 118-143.
doi: 10.1080/10864415.2015.1000225. |
| [47] |
J. Q. Yang, X. M. Zang, H. Y. Fu and C. Liu,
Inventory competition in a dual-channel supply chain with delivery lead time consideration, Appl. Math. Model., 42 (2017), 675-692.
doi: 10.1016/j.apm.2016.10.050. |
| [48] |
W. S. Yoo and E. Lee,
Internet channel entry: A strategic analysis of mixed channel structures, Marketing Science, 30 (2011), 2203-2211.
doi: 10.1287/mksc.1100.0586. |
| [49] |
L. Zhang and J. Wang,
Coordination of the traditional and the online channels for a short-life-cycle product, European J. Oper. Res., 258 (2017), 639-651.
doi: 10.1016/j.ejor.2016.09.020. |
| [50] |
B. Zheng, C. Yang, J. Yang and M. Zhang,
Dual-channel closed loop supply chains: Forward channel competition, power structures and coordination, International Journal of Production Research, 55 (2017), 3510-3527.
doi: 10.1080/00207543.2017.1304662. |
| [51] |
Y. Zhou, J. Guo and W. Zhou,
Pricing/service strategies for a dual-channel supply chain with free riding and service-cost sharing, International Journal of Production Economics, 196 (2018), 198-210.
doi: 10.1016/j.ijpe.2017.11.014. |
show all references
References:
| [1] |
K. D. Antia, M. Bergen and S. Dutta,
Competing with gray markets, MIT Sloan Management Review, 46 (2004), 63-69.
|
| [2] |
S. V. Baal and C. Dach,
Free riding and customer retention across retailers' channels, Journal of Interactive Marketing, 19 (2005), 75-85.
|
| [3] |
P. D. Berger, J. Lee and B. Weinberg,
Optimal cooperative advertising integration strategy for organizations adding a direct online channel, Journal of the operational research society, 57 (2006), 920-927.
|
| [4] |
F. Bernstein, J.-S. Song and X. Zheng,
Free riding in a multi-channel supply chain, Naval Res. Logist., 56 (2009), 745-765.
doi: 10.1002/nav.20379. |
| [5] |
D. W. Carlton and J. A. Chevalier,
Free riding and sales strategies for the Internet, Journal of Industrial Economics, 49 (2001), 441-461.
doi: 10.3386/w8067. |
| [6] |
T.-H. Chen,
Effects of the pricing and cooperative advertising policies in a two-echelon dual-channel supply chain, Computers & Industrial Engineering, 87 (2015), 250-259.
doi: 10.1016/j.cie.2015.05.013. |
| [7] |
S. C. Choi,
Price competition in a duopoly common retailer channel, Journal of retailing, 72 (1996), 117-134.
|
| [8] |
A. Cohen, When channel conflict is good, Sales and Marketing Management, 152 (2000), 13. |
| [9] |
B. Dan, C. Liu, G. Y. Xu and X. M. Zhang,
Pareto Improvement Strategy for Service-Based Free-Riding in a Dual-Channel Supply Chain, Asia-Pacific Journal of Operational Research, 31 (2014), 1-27.
|
| [10] |
R. Gulati and J. Garino,
Get the right mix of bricks and clicks, Harvard Business Review, 78 (2000), 107-117.
|
| [11] |
L. W. Hann, E-Commerce can create unexpected challenges, Best's Review, 99 (1999), 75. |
| [12] |
R. He, Y. Xiong and Z. Lin,
Carbon emissions in a dual channel closed loop supply chain: The impact of consumer free riding behavior, Journal of Cleaner Production, 134 (2016), 384-394.
doi: 10.1016/j.jclepro.2016.02.142. |
| [13] |
S. Heitz-Spahn,
Cross-channel free-riding consumer behavior in a multichannel environment: An investigation of shopping motives, sociodemographics and product categories, Journal of Retailing and Consumer Services, 20 (2013), 570-578.
doi: 10.1016/j.jretconser.2013.07.006. |
| [14] |
G. W. Hua, S. Y. Wang and T. C. E. Cheng,
Price and lead time decisions in dual-channel supply chains, European Journal of Operational Research, 205 (2010), 113-126.
|
| [15] |
L. Huang, X. H. Lu and S. L. Ba,
An empirical study of the cross-channel effects between web and mobile shopping channels, Information & Management, 53 (2016), 265-278.
|
| [16] |
S. Huang, C. Yang and H. Liu,
Pricing and production decisions in a dual-channel supply chain when production costs are disrupted, Economic Modelling, 30 (2013), 521-538.
|
| [17] |
W. Huang and J. M. Swaminathan,
Introduction of a second channel: Implications for pricing and profits, European Journal of Operational Research, 194 (2009), 258-279.
doi: 10.1016/j.ejor.2007.11.041. |
| [18] |
H. Ke and J. Liu,
Dual-channel supply chain competition with channel preference and sales effort under uncertain environment, Journal of Ambient Intelligence and Humanized Computing, 8 (2017), 781-795.
doi: 10.1007/s12652-017-0502-8. |
| [19] |
S. U. Kucuk and R. C. Maddux,
The role of the Internet on free-riding: An exploratory study of the wallpaper industry, Journal of Retailing and Consumer Services, 17 (2010), 313-320.
|
| [20] |
R. Lal and M. Sarvary,
When and how is the internet likely to decrease price competition?, Marketing Science, 18 (1999), 485-610.
doi: 10.1287/mksc.18.4.485. |
| [21] |
Q.-H. Li and B. Li,
Dual-channel supply chain equilibrium problems regarding retail services and fairness concerns, Appl. Math. Model., 40 (2016), 7349-7367.
doi: 10.1016/j.apm.2016.03.010. |
| [22] |
G. Li, L. Li and J. Sun,
Pricing and service effort strategy in a dual-channel supply chain with showrooming effect, Transportation Research Part E, 126 (2019), 32-48.
doi: 10.1016/j.tre.2019.03.019. |
| [23] |
W.-H. Liu, D. Xie and X.-C. Xu,
Quality supervision and coordination of logistic service supply chain under multi-period conditions, International Journal of Production Economics, 142 (2013), 353-361.
doi: 10.1016/j.ijpe.2012.12.011. |
| [24] |
L. Ma, F. Liu, S. Li and H. Yan,
Channel bargaining with risk-averse retailer, International Journal of Production Economics, 139 (2012), 155-167.
doi: 10.1016/j.ijpe.2010.08.016. |
| [25] |
R. A. Mittelstaedt,
Sasquatch, the abominable snowman, free riders and other elusive beings, Journal of Macromarketing, 6 (1986), 25-35.
doi: 10.1177/027614678600600206. |
| [26] |
Y. Moon, T. Yao and T. L. Friesz,
Dynamic pricing and inventory policies: A strategic analysis of dual channel supply chain design, Service Science, 2 (2010), 136-215.
doi: 10.1287/serv.2.3.196. |
| [27] |
S. K. Mukhopadhyay, X. W. Zhu and X. H. Yue,
Optimal contract Design for mixed channels under information asymmetry, Production and Operations Management, 17 (2008), 641-650.
|
| [28] |
X. Pu, L. Gong and X. Han,
Consumer free riding: Coordinating sales effort in a dual-channel supply chain, Electronic Commerce Research & Applications, 22 (2017), 1-12.
doi: 10.1016/j.elerap.2016.11.002. |
| [29] |
M. Radhi and G. Zhang,
Pricing policies for a dual-channel retailer with cross-channel returns, Computers & Industrial Engineering, 119 (2018), 63-75.
doi: 10.1016/j.cie.2018.03.020. |
| [30] |
M. Setak, H. K. Ahar and S. Alaei,
Coordination of information sharing and cooperative advertising in a decentralized supply chain with competing retailers considering free riding behavior, Journal of Industrial and Systems Engineering, 10 (2017), 151-168.
|
| [31] |
J. Shin,
How does free riding on customer service affect competition?, Marketing Science, 26 (2007), 488-503.
|
| [32] |
R. B. Singley and M. R. Williams,
Free riding in retail stores: An investigation of its perceived prevalence and costs, Journal of Marketing Theory and Practice, 2 (1995), 64-74.
doi: 10.1080/10696679.1995.11501685. |
| [33] |
F. Soleimani, A. Arshadi Khamseh and B. Naderi,
Optimal decisions in a dual-channel supply chain under simultaneous demand and production cost disruptions, Ann. Oper. Res., 243 (2016), 301-321.
doi: 10.1007/s10479-014-1675-6. |
| [34] |
Y. L. Tan and J. E. Carrillo,
Strategic analysis of the agency model for digital goods, Production and Operations Management, 26 (2017), 724-741.
doi: 10.1111/poms.12595. |
| [35] |
L. G. Telser,
Why should manufactures want fair trade?, Journal of Law and Economics, 3 (1960), 86-105.
|
| [36] |
J. Tirole, The Theory of Industrial Organization, Contributions to nonlinear functional analysis, MIT Press, 1988. |
| [37] |
A. A. Tsay and N. Agrawal,
Channel dynamics under price and service competition, Manufacturing & Service Operations Management, 2 (2000), 372-391.
doi: 10.1287/msom.2.4.372.12342. |
| [38] |
P. C. Verhoef, S. A. Neslin and B. Vroomen,
Multichannel customer management: Understanding the research-shopper phenomenon, International Journal of Research in Marketing, 24 (2007), 129-148.
|
| [39] |
J.-C. Wang, A.-M. Wang and Y.-Y. Wang,
Markup pricing strategies between a dominant retailer and competitive manufacturers, Computers & Industrial Engineering, 64 (2013), 235-246.
doi: 10.1016/j.cie.2012.09.009. |
| [40] |
K. L. Webb and N. M. Didow,
Understanding hybrid channel conflict: a conceptual model and propositions for research, Journal of Business-to-Business Marketing, 4 (1997), 39-78.
doi: 10.1300/J033v04n01_02. |
| [41] |
D. Wu, G. Ray, X. Geng and A. Whinston,
Implications of reduced search cost and free riding in e-commerce, Marketing Science, 23 (2004), 173-274.
doi: 10.1287/mksc.1040.0047. |
| [42] |
Y. Xia and S. M. Gilbert,
Strategic interactions between channel structure and demand enhancing services, European Journal of Operational Research, 181 (2007), 252-265.
doi: 10.1016/j.ejor.2006.06.027. |
| [43] |
D. H. Xing and T. M. Liu,
Sales effort free riding and coordination with price match and channel rebate, European Journal of Operational Research, 219 (2012), 264-271.
|
| [44] |
R. Yan,
Pricing strategy for companies with mixed online and traditional retailing distribution markets, Journal of Product & Brand Management, 17 (2008), 48-56.
doi: 10.1108/10610420810856512. |
| [45] |
R. Yan,
Product brand differentiation and dual-channel store performances of a multi-channel retailer, European Journal of Marketing, 44 (2010), 672-692.
doi: 10.1108/03090561011032324. |
| [46] |
R. Yan and Z. Pei,
The strategic value of cooperative advertising in the dual-channel competition, International Journal of Electronic Commerce, 19 (2015), 118-143.
doi: 10.1080/10864415.2015.1000225. |
| [47] |
J. Q. Yang, X. M. Zang, H. Y. Fu and C. Liu,
Inventory competition in a dual-channel supply chain with delivery lead time consideration, Appl. Math. Model., 42 (2017), 675-692.
doi: 10.1016/j.apm.2016.10.050. |
| [48] |
W. S. Yoo and E. Lee,
Internet channel entry: A strategic analysis of mixed channel structures, Marketing Science, 30 (2011), 2203-2211.
doi: 10.1287/mksc.1100.0586. |
| [49] |
L. Zhang and J. Wang,
Coordination of the traditional and the online channels for a short-life-cycle product, European J. Oper. Res., 258 (2017), 639-651.
doi: 10.1016/j.ejor.2016.09.020. |
| [50] |
B. Zheng, C. Yang, J. Yang and M. Zhang,
Dual-channel closed loop supply chains: Forward channel competition, power structures and coordination, International Journal of Production Research, 55 (2017), 3510-3527.
doi: 10.1080/00207543.2017.1304662. |
| [51] |
Y. Zhou, J. Guo and W. Zhou,
Pricing/service strategies for a dual-channel supply chain with free riding and service-cost sharing, International Journal of Production Economics, 196 (2018), 198-210.
doi: 10.1016/j.ijpe.2017.11.014. |
Figure 2a-2b.
The impact of $ \beta $ on the dual-channel retailer's profit under the four scenarios and his/her optimal decision under the channel-integration scenario.Channel structures of dual-channel retailers
Figure 3a-3b.
The impact of $ \eta $ on the dual-channel retailer's profit under the four scenarios and his/her optimal decision under the channel-integration scenario
Figure 4a-4b.
The impact of $ r $ on the dual-channel retailer's profit under the four scenarios and his/her optimal decision under the channel-integration scenario
Table 1.
Notations used in the paper
| Retail price of channel |
|
| Demand of the channel |
|
| Market base or potential demand of channel |
|
| Cross-price sensitivity for the two channels, where 0 < |
|
| The pre-sales service level of the traditional channel | |
| The traditional channel's service cost incurred by providing service level |
|
| The degree of free riding, where 0 |
|
| Service sensitivity parameter | |
| Revenue sharing rate of the online channel, where 0 |
|
| Profit of the channel |
|
| The total profit of the dual-channel retailer Subscripts: | |
| represents the retailer's traditional channel and |
| Retail price of channel |
|
| Demand of the channel |
|
| Market base or potential demand of channel |
|
| Cross-price sensitivity for the two channels, where 0 < |
|
| The pre-sales service level of the traditional channel | |
| The traditional channel's service cost incurred by providing service level |
|
| The degree of free riding, where 0 |
|
| Service sensitivity parameter | |
| Revenue sharing rate of the online channel, where 0 |
|
| Profit of the channel |
|
| The total profit of the dual-channel retailer Subscripts: | |
| represents the retailer's traditional channel and |
Table 2.
The retailer's optimal pricing/service policies and profits of the two channels under different scenarios
| $ a$ | $\Omega $ | Channel integration | TC-Stackelberg | OC-Stackelberg | Bertrand | |||||||||||||||||||
| $p_{1}^{I^{\ast} }$ | $S^{I^{\ast} }$ | $p_{2}^{I^{\ast} }$ | $\pi^{I\ast }$ (× 10$^{4})$ | Sales mode | $p_{1}^{TC}$ | $S^{TC}$ | $p_{2}^{TC}$ | $\pi_{1}^{TC}$ (× 10$^{4})$ | $\pi_{2}^{TC}$ (× 10$^{4})$ | $\pi^{\, TC}$ (× 10$^{4})$ | $p_{1}^{OC}$ | $S^{OC}$ | $p_{2}^{OC}$ | $\pi_{1}^{OC}$ (× 10$^{4})$ | $\pi_{2}^{OC}$ (× 10$^{4})$ | $\pi^{\, OC}$ (× 10$^{4})$ | $p_{1}^{B}$ | $S^{B}$ | $p_{2}^{B}$ | $\pi_{1}^{\, B}$ (× 10$^{4})$ | $\pi_{2}^{\, B}$ (× 10$^{4})$ | $\pi^{\, B}$ (× 10$^{4})$ | ||
| 40 | 65.5 | —- | 107.4 | 289 | 7.0234 | Single-channel | 284 | 58.7 | 136 | 1.1585 | 1.8385 | 2.9970 | 232 | 50 | 121 | 1.1393 | 1.3513 | 2.4907 | 231 | 50 | 116 | 1.1179 | 1.3490 | 2.4669 |
| 70 | 65.5 and $\Psi $ < 0 | —- | 112.5 | 326 | 8.9311 | Single-channel | 304 | 58.7 | 155 | 1.5977 | 2.3871 | 3.9849 | 251 | 50 | 141 | 1.5788 | 1.8229 | 3.4017 | 249 | 50 | 135 | 1.5495 | 1.8197 | 3.3692 |
| 500 | 65.5 and $\Psi $ > 0 | —- | 161.8 | 802 | 54.017 | Single-channel | 584 | 58.7 | 426 | 15.633 | 18.113 | 33.746 | 522 | 50 | 421 | 15.740 | 16.321 | 32.062 | 518 | 50 | 404 | 15.463 | 16.293 | 31.756 |
| 3500 | 65.5 and $\Psi $ > 0 | 3879 | 139.0 | 3248 | 1146.6 | Dual-channel | 2541 | 58.7 | 2317 | 516.20 | 536.80 | 1053.0 | 2413 | 50 | 2378 | 523.51 | 520.13 | 1043.6 | 2393 | 50 | 2279 | 514.49 | 519.22 | 1033.7 |
| 5000 | 65.5 and $\Psi $ > 0 | 5140 | 140.1 | 4500 | 2258.0 | Dual-channel | 3519 | 58.7 | 3263 | 1030.6 | 1064.4 | 2095.0 | 3359 | 50 | 3356 | 1045.7 | 1036.2 | 2081.8 | 3331 | 50 | 3216 | 1027.7 | 1034.4 | 2062.0 |
| $ a$ | $\Omega $ | Channel integration | TC-Stackelberg | OC-Stackelberg | Bertrand | |||||||||||||||||||
| $p_{1}^{I^{\ast} }$ | $S^{I^{\ast} }$ | $p_{2}^{I^{\ast} }$ | $\pi^{I\ast }$ (× 10$^{4})$ | Sales mode | $p_{1}^{TC}$ | $S^{TC}$ | $p_{2}^{TC}$ | $\pi_{1}^{TC}$ (× 10$^{4})$ | $\pi_{2}^{TC}$ (× 10$^{4})$ | $\pi^{\, TC}$ (× 10$^{4})$ | $p_{1}^{OC}$ | $S^{OC}$ | $p_{2}^{OC}$ | $\pi_{1}^{OC}$ (× 10$^{4})$ | $\pi_{2}^{OC}$ (× 10$^{4})$ | $\pi^{\, OC}$ (× 10$^{4})$ | $p_{1}^{B}$ | $S^{B}$ | $p_{2}^{B}$ | $\pi_{1}^{\, B}$ (× 10$^{4})$ | $\pi_{2}^{\, B}$ (× 10$^{4})$ | $\pi^{\, B}$ (× 10$^{4})$ | ||
| 40 | 65.5 | —- | 107.4 | 289 | 7.0234 | Single-channel | 284 | 58.7 | 136 | 1.1585 | 1.8385 | 2.9970 | 232 | 50 | 121 | 1.1393 | 1.3513 | 2.4907 | 231 | 50 | 116 | 1.1179 | 1.3490 | 2.4669 |
| 70 | 65.5 and $\Psi $ < 0 | —- | 112.5 | 326 | 8.9311 | Single-channel | 304 | 58.7 | 155 | 1.5977 | 2.3871 | 3.9849 | 251 | 50 | 141 | 1.5788 | 1.8229 | 3.4017 | 249 | 50 | 135 | 1.5495 | 1.8197 | 3.3692 |
| 500 | 65.5 and $\Psi $ > 0 | —- | 161.8 | 802 | 54.017 | Single-channel | 584 | 58.7 | 426 | 15.633 | 18.113 | 33.746 | 522 | 50 | 421 | 15.740 | 16.321 | 32.062 | 518 | 50 | 404 | 15.463 | 16.293 | 31.756 |
| 3500 | 65.5 and $\Psi $ > 0 | 3879 | 139.0 | 3248 | 1146.6 | Dual-channel | 2541 | 58.7 | 2317 | 516.20 | 536.80 | 1053.0 | 2413 | 50 | 2378 | 523.51 | 520.13 | 1043.6 | 2393 | 50 | 2279 | 514.49 | 519.22 | 1033.7 |
| 5000 | 65.5 and $\Psi $ > 0 | 5140 | 140.1 | 4500 | 2258.0 | Dual-channel | 3519 | 58.7 | 3263 | 1030.6 | 1064.4 | 2095.0 | 3359 | 50 | 3356 | 1045.7 | 1036.2 | 2081.8 | 3331 | 50 | 3216 | 1027.7 | 1034.4 | 2062.0 |
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