Coordination strategies in dual-channel supply chain considering innovation investment and different game ability

Abstract

PurposeThis paper aims to investigate the impact of retailer innovation investment and its spillover’s effect on competitive dual-channel supply chain pricing and optimization strategy, and explore the coordination mechanism considering decision maker’s bargaining ability.Design/methodology/approachThe Cournot and Stackelberg game methodology are made use of for the duopoly decentralized and joint decision-making model. The bargaining theory with different negotiation ability was used to analysis the coordination mechanism. Then this paper validates the model by simulation techniques.FindingsThe results enlightened some interesting facts, the increase in innovation demand coefficient spur rise in channel pricing, innovation investment level, supply chain profit and consumer welfare. The rise in innovation spillover coefficient leads to increase in online channel pricing, supply chain profit and consumer welfare. Due to the innovation spillover effect, retailer has to maintain channel competitiveness either through low price or high innovation investment strategies. In addition, online channel pricing, supply chain profit and consumer welfare in joint decision-making scenario is greater than that of decentralized decision-making scenario, while the difference in retailer channel pricing depends on parameters value. The increase in retailer’s joint negotiation factor leads to decrease in channel pricing and innovation investment level. Furthermore, there existence of an optimal innovative investment cost sharing proportion threshold indicates the achievement of dual-channel supply chain coordination. A refinement equilibrium can be achieved through Robinstein bargaining game. A larger interest discount factor leads to decrease in profit.Originality/valueThe research provides a theoretical reference for dual-channel supply chain pricing and coordination strategy under channel competition environment. The research can develop innovative investment strategies for retailers and implement response strategies for manufacturers.