Competitive strategies in the presence of consumers' expected service and product returns

Ting Zhang; Shuhua Chang; Yan Dong; Jingyi Yue; Kok Lay Teo

doi:10.3934/jimo.2021108

Article Contents

2022, Volume 18, Issue 5: 3187-3214. Doi: 10.3934/jimo.2021108

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Competitive strategies in the presence of consumers' expected service and product returns

1.
Coordinated Innovation Center for Computable Modelling in Management Science, Tianjin University of Finance and Economics, Tianjin 300222, China
2.
Yango University, Fujian 350015, China
3.
School of Mathematical Sciences, Sunway University, Malaysia

^* Corresponding author: Shuhua Chang
^* Corresponding author: Shuhua Chang

Received: February 2021

Revised: March 2021

Early access: June 2021

Published: November 2022

This project was supported in part by the Major Research Plan of the National Natural Science Foundation of China (91430108), the National Natural Science Foundation of China (11771322), the National Social Science Foundation of China (19CGL002), Tianjin Social Science Planning Project (TJGLQN20-002), and the Russian Science Foundation (20-61-46017)

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Abstract

This paper investigates the optimal strategies and profits of dual channel with product returns in the presence of customers' expected service. Customers' expected service is related to advertising effort and price. We build a two-stage decision making process to analyze the impact of expected services of customers. In addition, we analyze the parameter sensitivity and compare the competitive equilibrium strategies. The results show that the manufacturer will give a lower wholesale price to the retailer in some case. Furthermore, the dual-channel product returns will discourage advertising effort and the service level of the retailer, but it will enable the manufacturer to provide a higher service level. Thus, for managers, the survey of the expected service of customers is very important for the optimal strategies making, and it should not always blindly exploit the retailer's profit for the manufacturer. Finally, when the physical store allows unconditional return of goods, the service level of the online channel will be more considerate.

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Mathematics Subject Classification: Primary: 91A35, 90B50; Secondary: 91B06.

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Table 1. The impact of the expected service

	$ \omega $	$ S_d $	$ S_r $	$ A $	$ Q_d $	$ Q_r $	$ \pi_m $	$ \pi_r $
$ a=b=0 $	6.0174	2.1878	1.5861	2.8323	3.6562	6.7535	67.2808	10.7280
$ a\neq0,b\neq0 $	6.1059	2.1259	1.5153	2.4894	2.7451	5.8292	55.5396	8.8085
change	$ + $	$ - $	$ - $	$ - $	$ - $	$ - $	$ - $	$ - $

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Table 2. Sensitivity analysis

	$ A $	$ \omega $	$ S_d $	$ S_r $	$ Q_d $	$ Q_r $	$ \pi_d $	$ \pi_m $	$ \pi_r $
$ \tau $	$ \nearrow $	$ \searrow\nearrow $	$ \nearrow\searrow $	$ \nearrow\searrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow\searrow $
$ \delta $	$ \nearrow $	$ \searrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \searrow $	$ \nearrow $	$ \nearrow $	$ \searrow $
$ \mu $	$ \nearrow $	$ \searrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow\searrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $
$ g $	$ \searrow $	$ \nearrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow\nearrow $	$ \searrow $	$ \searrow $	$ \searrow $
$ \gamma $	$ \nearrow $	$ \searrow\nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $	$ \nearrow $
$ a $	$ \searrow $	$ \nearrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow $
$ r $	$ \searrow $	$ \nearrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \searrow $	$ \nearrow\searrow $	$ \nearrow $
^* Some parameters are analyzed only within ranges.

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Table 3. Decision changes influenced by parameters

	$ g $	$ \gamma $	$ \phi $	$ \delta $	$ \tau $	$ \mu $	$ a $
$ B $	$ +\rightarrow - $	$ -\rightarrow + $	$ -\rightarrow + $	$ +\rightarrow - $	$ -\rightarrow + $	$ +\rightarrow - $	$ +\rightarrow - $
$ E $	$ +\rightarrow - $	$ -\rightarrow + $	$ -\rightarrow + $	$ +\rightarrow - $	$ -\rightarrow + $	$ - $	$ - $
$ F $	$ - $	$ - $	$ -\rightarrow + $	$ +\rightarrow - $	$ - $	$ - $	$ - $
^* See Appendix Table 1 for details.

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Table 4. The impact of the expected service

	$ \omega $	$ S_d $	$ S_r $	$ A $	$ P $	$ \pi_m $	$ \pi_r $
$ a=b=0 $	7.2135	7.5698	3.0290	5.4090	10.9997	47.9312	1.7613
$ a\neq0,b\neq0 $	6.4174	6.7444	2.5324	4.1064	9.5829	38.4156	2.5834
change	$ - $	$ - $	$ - $	$ - $	$ - $	$ - $	$ + $

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Table 1. The changes of decision due to the influence of the parameters

	$ g $		$ \gamma $		$ \phi $		$ \delta $		$ \tau $		$ \mu $		$ a $
B	$<0.69 $	$>0.69 $	$<0.53 $	$>0.53 $	$<0.2 $	$>0.2 $	$<0.2 $	$>0.2 $	$<0.66 $	$>0.66 $	$<0.6 $	$>0.6 $	$<0.018 $	$>0.018 $
B	$>0 $	$<0 $	$<0 $	$>0 $	$<0 $	$>0 $	$>0 $	$<0 $	$<0 $	$>0 $	$>0 $	$<0 $	$>0 $	$<0 $
E	$<0.3 $	$>0.3 $	$<0.65 $	$>0.65 $	$<0.49 $	$>0.49 $	$<0.09 $	$>0.09 $	$<0.85 $	$>0.85 $	$<0 $		$<0 $
E	$>0 $	$<0 $	$<0 $	$>0 $	$<0 $	$>0 $	$>0 $	$<0 $	$<0 $	$>0 $	$<0 $		$<0 $
F	$<0 $		$<0 $		$<0.25 $	$>0.25 $	$<0.17 $	$>0.17 $	$<0 $		$<0 $		$<0 $
F	$<0 $		$<0 $		$<0 $	$>0 $	$>0 $	$<0 $	$<0 $		$<0 $		$<0 $

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