Efficient Strategic Pricing in a Dual-Channel Stackelberg Supply Chain: Incorporating Remanufacturing and Sales Commissions across Multiple Periods

Abstract

The rise of e-commerce has significantly impacted consumer shopping habits, resulting in profit loss for traditional supply chains. In response to intense competition, numerous companies have transitioned their business models to embrace dual-channel configurations, seeking to captivate customers and increase their market share. Nonetheless, research on decentralized dual-channel supply chain configurations is scarce and predominantly concentrates on single-period pricing. This paper addresses this gap by employing Stackelberg’s game theory to investigate the multi-periodic pricing and remanufacturing decisions within a decentralized dual-channel supply chain with reverse logistics, specialized in the manufacturing and sales of pharmaceutical products. Moreover, this work considers that the online channel pays a sales commission to the pharmacy in return for the provided after-sales services, aiming to incorporate the aspect of sharing revenues. A mathematical formulation is proposed in a multi-periodic environment allowing us to simultaneously maximize the total profits of the manufacturer, the pharmacy and the online channel, by optimizing the pricing and remanufacturing strategies. Numerical analyses examine the customer purchasing preference’s effect on the demand and pricing decisions of each channel, the impact of the collection cost on the optimal remanufacturing strategy, and assess the break-even point of the total profits generated in both channels according to the sales commission. This study’s novelty lies in employing Stackelberg’s game theory to develop a mathematical formulation for the multi-periodic pricing and remanufacturing problem within a decentralized dual-channel supply chain, incorporating a sales commission between both distributors.