Competition and Coordination in a Dual-Channel Supply Chain With Asymmetric Retailers

Abstract

This article studies competition and coordination in a dual-channel supply chain where one supplier supplies homogeneous products to multiple asymmetric retailers, meanwhile, selling products to the end consumers acting as retailers, through a two-level Stackelberg game. This article first studies the asymmetry among the retailers in terms of the different characteristics of the cost, price, quantity. This article finds that a supplier's profits increase when the number of retailers are high enough in the retail market, even though the retail price of the retailers is lower than that of the supplier, or the wholesale price is cut down when there are many retailers competing in the retail market. On the other hand, under certain conditions, the efficiency of supply chain goes to 1. In this article, the authors show that some traditional contracts that can perfectly coordinate the single-channel supply chain, while failing to coordinate the dual-channel supply chain. Therefore, this article puts forth a linear quantity discount contract and first proves it can be applicable to the dual-channel supply chain with asymmetric retailers under a certain special condition where the lead retailer exits the retail market. The authors examine contracts which can reduce the loss of the efficiency, though they cannot completely coordinate a dual-channel supply chain.