A manufacturer distribution issue: how to manage an online and a traditional retailer

Nawel Amrouche () and Ruiliang Yan ()
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Nawel Amrouche: Long Island University
Ruiliang Yan: Texas A&M University

Annals of Operations Research, 2016, vol. 244, issue 2, No 1, 257-294

Abstract: Abstract The Internet’s popularity and success have shaped new relationships in B2B market. The use of dual channels becomes a widespread practice and new challenges face channel members. We assess the benefit of two coordinating mechanisms namely the whole-channel price and the quantity discount when a manufacturer sells his product through a traditional and an online store and uses a single wholesale price for both retailers. Then, we extend the analysis to two-wholesale pricing scenario. Our model suggests that product compatibility to the web is a key factor impacting the decision to coordinate the channel or not and which coordination mechanism to use. We found also that the whole channel is always better-off when coordination is implemented though channel members have different positions with regards to such decision. Hence, a profit-sharing mechanism is required to satisfy all members. Finally, we analyze the effect of varying channel substitutability on channel members’ profitability.

Keywords: Coordination mechanisms; Game theory; Dual channels; Pricing strategies (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s10479-015-1982-6

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