Pricing decision making and coordination of a dual‐channel supply chain considering online reviews and channel preferences

Abstract

AbstractMany problems regarding channel conflicts exist in the pricing process of a manufacturer‐led dual‐channel supply chain. By considering the fact that online reviews and channel preferences are the important factors that influence consumer purchasing behaviors and the decision‐making of the supply chain, this paper deals with these problems through the development of a model involving online reviews and channel preferences. It then analyzes optimal decisions under either decentralized or centralized decision‐making scenarios. The impact of online review service input and consumer channel preference on optimal supply chain decisions and profits is further analyzed. Finally, based on the developed model, a revenue sharing contract coordination scheme is designed to achieve Pareto improvements in the supply chain. The results show that the degree of consumer preference for online channels affects the best consumer decisions and the overall profit of the supply chain. The impact coefficient of online reviews is positively correlated with the manufacturer's direct selling price, the level of input to online review services, and the profit of the entire supply chain. The provision of online review services can significantly increase channel prices, market sales, and profits compared to channel preferences. The overall profit of the supply chain under centralized decision‐making is significantly greater than that under decentralized decision‐making, and the coordination model can effectively coordinate the supply chain and alleviate conflicts.