Quantity Leadership for a Dual-Channel Supply Chain with Retail Service

Abstract

In a dual-channel supply, the manufacturer sells the products by both a traditional channel via the retailer and an online channel directly. Comparing with the direct channel, the retailer may provide additional services to the traditional channel. This paper studies the quantity leadership for a dual-channel supply chain with retail service. The manufacturer decides the wholesale price of the products and its selling quantity via the online channel, and the retailer decides the service level and its selling quantity via the traditional channel. We consider three Cournot competition games: Manufacturer-as-leader game, retailer-as-leader game, and simultaneous game. Optimal solutions are derived for these games. Based on the optimal solutions, we investigate the quantity leadership/followership decisions for the manufacturer and retailer, associated with the changes of some parameters. We observe that when the service sensitivity parameters are low, being a follower is a dominant strategy for the retailer; otherwise, both strategies of manufacturer-as-leader (retailer as the follower) and retailer-as-leader (manufacturer as the follower) are Nash equilibriums. We further conduct the numerical studies to investigate the impacts of parameters related to the retail service, and discuss the insights of the findings.