Competition And Coordination In A Dual-Channel Supply Chain

With the rapid development of information technology and the extensive application of electronic commerce, many manufacturers distribute products through the traditional retail channel as well as open up the online direct channel to sell products to consumers. The dual-channel supply chain mode of combining the traditional retail channel and electronic direct channel is very challenging and has a very good application prospect. The dual-channel supply chain has become the focus of the corporate world, and at the same time has become the management theory research direction. When the manufacturer and the retailer compete in the supply chain, both parties’ power can affect the supply chain structure selection and directly determines supply chain members’market position (a leader or follower), which can affect the decision-making sequence. In addition, the electronic direct channel has a large database, and this kind of information service generates positive stimulus on the electronic channel’s demand, as well as produces spillover effects on the traditional channel’s demand at the same time, which forms the market pattern that the retailer gets a free ride on the electronic direct channel’s information service. To alleviate the channel conflict, the manufacturer and the retailer could take coordination strategy. However, in the long-term cooperation process, due to the incomplete information and both parties’bounded rationality, both parties cannot find the optimal strategy in the first place, and constantly adjust and improve the strategy by imitation learning in the process of repeated game to search for the optimal strategy. In view of this, this paper uses game theory, consumer utility theory and optimization concept to study two layers of dual-channel supply chain. This paper explores the dual-channel supply chain strategies under different power structure, examines the influence of the manufacturer’s introducing electronic direct channel on channel pricing, market share, supply chain members’ profit and the supply chain efficiency, and builds the coordination mechanism under the scenario that the electronic direct channel provides information service which has a spillover effect. Finally this paper uses the evolutionary game method to explore the problem of long-term cooperation between the manufacturer and the retailer.Firstly, based on members’different bargaining power in a dual channels system, this paper discusses the impact of three games on channel pricing, demand and members’ profits by building Manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash game model. The main findings are:1) if cross-price elasticity of demand is equal to 0, the impact of three games on dual-channel supply chain competition results is identical; 2) if cross-price elasticity of demand is not equal to 0, the price of the traditional channel (direct channel) is the highest in Retailer Stackelberg game (Manufacturer Stackelberg), which lead to the minimum demand in the traditional channel(direct channel), but the demand of the traditional channel (direct channel) is the biggest in Manufacturer Stackelberg (Retailer Stackelberg); from the perspective of members’ profits, both the manufacturer and the retailer are more willing to give up the power and act as the Stackelberg followers, and furthermore Nash game is a strictly dominated strategy. A numerical example is used to verify the effectiveness of the conclusions.Secondly, considering spillover effect of the service provided in direct electronic channel, this paper studies how the manufacturer’s act of introducing direct electronic channel impacts channel pricing, market demand, supply chain members’ profits and the whole chain’s profits, and furthermore analyzes the impact of spillover intensity of service on dual channels competition equilibriums. The findings show that adding direct electronic channel can decrease the demand of traditional channel, but can increase the whole market demand. Dual channels strategy can make the manufacturer improve the wholesale price to alleviate the intensity of competition between traditional channel and direct channel. The introduction of direct channel can increase the profits of both the manufacturer and the whole supply chain, and hence the manufacturer is always willing to add direct electronic channel. Although the manufacturer may be willing to allow the retailer’s free riding, the introduction of direct electronic channel can always damage the profits of the retailer. In the end, a transfer payment mechanism from the manufacturer to the retailer is designed, which can realize the Pareto improvement of members’profit, alleviate the conflict of dual channels, and reduce the double marginalization effect.Finally, in order to coordinate the whole dual-channel supply chain, this paper constructs the evolutionary game model of cooperation mechanism between the manufacturer and the retailer, analyzes some factors affecting evolutionary paths; in order to enhance members’ willingness to cooperate in supply chain, we explore the impact of government’s subsidy mechanism and punishment mechanism on evolutionary results. The results show that the smaller the cost of coordinating the dual-channel supply chain is and the bigger the excessive income is will help the whole system evolve into cooperation strategy; the proportion of excessive income game participants get should has a positive correlation with the proportion of cost they bear, which can enhance their willingness to cooperate; there is an optimal allocation ratio of excessive income that can maximize the probability of members’ cooperation; to ensure that government’s control mechanism is effective, the subsidy and fine should meet some conditions. In the end, the accuracy of conclusions is verified by numerical simulation.