Research On The Pricing Strategy And Coordination Contracts Of Dual Channel Supply Chain

With the rapid growth and exciting potential of Internet channel, more and more firms utilize both the traditional channel and Internet channel to sell their products. The introduction of Internet channel brings more profits to the supply chain. It also brings many challenges to the supply chain, such as the channel conflict and the difficulty of realizing coordination of dual channel supply chain. A main reason causing these challenges is free riding problem. Many consumers firstly accept the retail services such as explaining the product in detail, touch and feel the real product in the traditional store, and then buy the product through the Internet store after making purchase decision. Such behavior is called free riding. There are four simple dual channel arrangements. They are vertically integrated dual channel (VID), partially integrated dual channel (PID), decentralized dual channel (DD) and horizontally integrated dual channel (HID). In different dual channel structures, the effluence caused by the free riding problem is different. Therefore, aiming at supply chain of four dual channel structures, by using optimization theory, non-cooperative game theory and coordination mechanism designing theory, among previous studies on varies pricing strategies and coordination contracts of dual channel supply chain, this dissertation studied pricing strategies and coordination contracts of dual channel supply chain in case of free riding problem, and compared the four structures of dual channel supply chain.First of all, this paper analyzed the optimal pricing strategies in the integrated and 3 decentralized structures of the dual channel supply chain, and compared the pricing strategy and revenue of supply chain members with the single channel supply chain. The conclusion shows that the free riding problem decreases the revenue of the traditional retailer and the whole supply chain. This paper also studied the application of coordination strategy of revenue sharing contract to various dual channel structures when free riding problem exists. The result shows that revenue sharing contract can fully coordinate the entire supply chain of decentralized dual channel, and can’t fully coordinate the entire supply chain of horizontally integrated dual channel, the revenue sharing contract and a coordination policy of fixed price difference can fully coordinate the entire supply chain of partially integrated dual channel.Secondly, focusing on the situation that the manufacturer using the product strategy, the product selling in the internet channel either the same with or different with the product selling in the traditional channel, to eliminate the free riding problem, this paper analyzed the optimal pricing strategies in the integrated and 3 decentralized structures of the dual channel supply chain. The result shows that when the disadvantage of the internet channel is small, the product selling in the internet channel should different from the product selling in the traditional channel, otherwise the supply chain sells the same product in both channels. When all the dual channel structures use the differentia product strategy, Compared with the VID, the extent of product Differentiation in 3 decentralized structures is greater. This paper also studied the application of coordination strategy of rebate contract to various dual channel structures when free riding problem exists. The result shows that the contract can fully coordinate the entire supply chain of 3 decentralized structures when the respective requirements are satisfied.Thirdly, considering that there is a relationship between traditional retailer’s service strategy and the market demand, this paper analyzed the optimal pricing strategies in the integrated and 3 decentralized structures of the dual channel supply chain. The result shows that the quality of the traditional retailer’s service and the revenue of the whole supply chain will decrease along with the free riding problem becoming more serious. This paper also studied the application of coordination strategy of two tariff pricing range and three tariff pricing range to various dual channel structures when free riding problem exists. The result shows that three tariff pricing range can fully coordinate the entire supply chain of decentralized dual channel, the three tariff pricing range and a coordination policy of fixed price difference can fully coordinate the entire supply chain of partially integrated dual channel, and the two tariff pricing range can fully coordinate the entire supply chain of horizontally integrated dual channel.Finally, focusing on the situation that there are 2 different markets and the price of traditional channel is different, this paper analyzed the optimal pricing and internet channel introducing strategies in the integrated and 3 decentralized structures of the dual channel supply chain. The result shows that the internet channel introducing strategy in VID is introducing the internet channel to both markets when there isn’t free riding problem, but when the free riding problem exists and becomes more serious, the optimum choice is introducing the internet channel only to one market and even not introducing the internet channel. This paper also compared the internet channel introducing strategy in different channel arrangements, we found that the strategies in 3 decentralized structures are different from the structures of VID to some distant which makes it difficult to coordinate the entire supply chain.