Behavior-based price discrimination in a dual-channel supply chain with retailer’s information disclosure

Abstract

Abstract This research investigates a manufacturer’s behavior-based price discrimination (BPD) strategies in a dual-channel supply chain in the presence of the retailer’s information disclosure service. The manufacturer sells a two-period experience product through its own online store and the physical storefronts of retailers. We set up four scenarios of two-period games between the manufacturer’s online and offline stores. Customers who are heterogeneous in their channel preferences are located along a Hoteling line of unit length. We focus on the interaction between the manufacturer’s BPD strategies and the retailer’s information disclosure services. We find that storefronts can provide information disclosure service at the beginning of period 2 while the manufacturer can apply BPD, through which the online store differentiates prices between new and repeat buyers based on the sale history of period 1. The research explores the competition between online and offline retail stores and the interplay between information disclosure and BPD in a dual-channel supply chain. Also, the research has important practical implications. Manufacturers should encourage new purchases in online stores when exercising BPD, if retailers can disclose information offline, especially offering experienced services. Furthermore, manufacturers should induce retailers to reveal the product information by distorting the wholesale price downward.