Retailer Promotional Dual Channel Pricing Research Efforts

With the prevalence of information technology and rapid expansion of electronic commerce, more and more consumers are trying to attain commodities through Internet channel. At the same time, a number of traditional manufacturers have established on-line channel except their existing off-line channel. Under this new business model, channel competition and channel conflict become even more violent. Facing this incompatible and complex setting, what measures should the upstream manufacturer and the downstream retailer take is need to be solved.Based on the overall review of pricing problems of supply chain in dual-channel, we discuss the pricing strategies of manufacturer and retailer considering retailer launching promotion in its traditional retail channel applying game theory and optimization methods.Firstly, we modify the extant demand function adding the influence of retailer’s promotion on its retail channel and the free-riding effect of manufacturer on its on-line channel. Then a dual-channel pricing model with both tradition retail channel and on-line direct channel is established and the optimal pricing strategies of manufacturer and retailer under Stackelberg competing mode where manufacturer is lead and Bertrand competing mode where they have equal status is analyzed. The result shows that leading mode will benefit for manufacturer. However, following the pricing strategy of manufacturer is benefit to retailer. Otherwise, seeking for equal status is the better strategy for retailer.Secondly, we further the former chapter by considering that how much effort does retailer exert is its private information, and investigate the optimal pricing strategies of manufacturer and retailer under asymmetric information employing a signaling game analysis. And our study demonstrates that equilibrium of signaling game is pooling equilibrium when promotion sharing proportion of manufacturer is lower and retailer with low promotion effort will imitate from retailer with high effort. As a result, manufacturer cannot update its prior judge from retailer’s signal when both retailers send the same order quantity signal. However, equilibrium of signaling game is separating equilibrium when promotion sharing proportion of manufacturer is higher and retailer will send their order quantity signals of truth sale-effort type.Finally, we take into account the influence of decision-makers’ behavioral factors on their pricing strategies, and whether the retailer’ promotion effort is its private information or common information is analyzed separately. The results manifests that both risk aversion and demand fluctuation standing for market risk will bring negative effect into decision-makers’profit in most cases. Under asymmetric information, there exists a threshold relating with retailer’s sale-effort information that manufacturer knows. The optimal price of manufacturer and retailer are both higher than their symmetric case separately once retailer’s true effort level is higher than the threshold. Otherwise, both their optimal price are lower than the symmetric case.