Pricing decisions during panic buying and its effect on a dual-channel supply chain under different channel power structures

Sarin Raju (), T. M. Rofin () and S. Pavan Kumar ()
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Sarin Raju: School of Management, National Institute of Technology Karnataka
T. M. Rofin: National Institute of Industrial Engineering (NITIE)
S. Pavan Kumar: School of Management, National Institute of Technology Karnataka

Journal of Revenue and Pricing Management, 2024, vol. 23, issue 2, No 2, 83-95

Abstract: Abstract Uncertain future and fears about the stock-outs will compel the customers to stock goods at home, resulting in panic buying. Even though it is a frequently observed consumer behaviour, there is scant literature in dual-channel supply chain (DCSC) which address this demand disruption. This study analytically models and analyses the impact of panic buying in a DCSC. For that we consider a two-echelon dual-channel supply chain comprising of a manufacturer, brick and mortar store (r-store), and online store (e-store). The interaction between the upstream and downstream channel members is modelled using a Stackelberg game. Further, we examined two models based on the channel power difference between the r-store and e-store, i.e., (i) r-store leader model and (ii) the e-store leader model. We also used Monte-Carlo simulation to deduce corollaries and managerial insights. We found that the Law of demand doesn’t hold during panic buying disruption, and even essential goods act like Veblen goods during the period. Contrary to the expectation, panic buying was also found to be beneficial for the e-store. Counter-intuitive results with respect to the channel power were also obtained in the sense that it is beneficial for the r-store to operate under the leadership of the e-store and vice versa. The study shows that the manufacturer is better off with panic buying.

Keywords: Dual-channel supply chain; Game theory; Panic buying; Demand disruption (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41272-023-00425-x

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