Abstract
Small and medium-sized enterprises (SMEs) usually suffer price conflicts when they sell products via dual-channel, i.e., the traditional retail channel and the online direct channel. In this paper, a spatial competition equilibrium model is established to describe price decision-making and coordination in a dual-channel system comprising two players, i.e., one manufacturer and one retailer sailing one product. Based on the model, the optimal pricing strategies for each player and the channel profits are derived mathematically under two different power structures: the manufacturer and the retailer making decisions independently, and the retailer leading the manufacturer in a Stackelberg game. The impacts of digital attributes of product and power structure changing on optimal pricing strategies and channel profits are further observed by mathematical deduction and numerical analysis. The research suggests that to achieve a win-win solution, non-dominant SMEs should follow dominant retailers’ pricing in a cooperative way.
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