Dynamic pricing and sales effort in dual-channel retailing for seasonal products

Abstract

<p style='text-indent:20px;'>This paper studies the joint strategies of dynamic pricing and sales effort involving a seller and a third-party e-commerce platform (TPECP). The seller sells seasonal products through both offline and online channels, and the latter is opened on the TPECP. Considering a dual-channel setting, this paper fills a gap in the studies of joint strategies of dynamic pricing and sales effort. This paper formulates dynamic decision models and investigates them under both centralized and decentralized decision-making cases. Furthermore, a revenue-cost sharing contract is proposed to coordinate the two parties' decisions in the decentralized case, and it is validated theoretically and numerically. The key findings are as follows: For a given selling slot, the optimal online price decreases and the optimal sales effort level increases in the centralized case as the inventory level increases and remains below a threshold; however, when the inventory level exceeds the threshold, both the optimal online price and sales effort level remain fixed as the the inventory level increases in both cases. In addition, for a given inventory level below the threshold, the optimal online price decreases and the optimal sales effort level increases over time in both cases; however, when the inventory level exceeds the threshold, over time, the optimal online price increases and the optimal sales effort level decreases in the centralized case, and both the optimal online price and sales effort level increase in the decentralized case. Finally, a numerical experiment and some management implications are provided.</p>