PRICING AND INVENTORY STRATEGIES FOR A TWO-STAGE DUAL-CHANNEL SUPPLY CHAIN

Run H. Niu (), Xuan Zhao (), Ignacio Castillo () and Tarja Joro ()
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Run H. Niu: George Herbert Walker School of Business and Technology, Webster University, St. Louis, MO, 63119, USA
Xuan Zhao: School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario, N2L 3C5, Canada
Ignacio Castillo: School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario, N2L 3C5, Canada
Tarja Joro: Department of Finance and Management Science, University of Alberta School of Business, Edmonton, Alberta, T6G 2R6, Canada

Asia-Pacific Journal of Operational Research (APJOR), 2012, vol. 29, issue 01, pages 1240004-1-1240004-38

Abstract: The Internet is becoming increasingly important as a sales channel. Thus, most large retail firms have adopted a multi-channel strategy that includes both web-based channels and pre-existing offline channels. In this paper, we consider joint pricing and inventory/production decision problems for members in a monopoly two-stage dual-channel retailer supply chain. For a dual-channel retailer, pricing in one channel will affect the demand in the other channel. This subsequently affects the retailer's replenishment (ordering) decisions, which have an impact on the producer's inventory/production plans and wholesale price decisions. It is clear then that pricing decisions and inventory/production decisions are interacting in each member of the supply chain and among the members in the chain as well. In this paper, we analyze joint pricing and inventory/production problems under three scenarios by incorporating intra-product line price interaction in the EOQ model. We show that a unique equilibrium exists under certain realistic conditions. We also provide numerical results that offer insights for pricing strategies for the dual-channel retailer supply chain and for product design for different channels.

Keywords: Dual-channel; pricing; inventory strategies; supply chain (search for similar items in EconPapers)
Date: 2012
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