Equal Pricing Strategies in a Dual Channel Supply Chain

Abstract

In this article, equal pricing strategies are studied in a dual channel supply chain where a manufacturer sells to a retailer as well as to consumers through a direct channel according to the assumption that the manufacturer commits setting the same retail price as the traditional channel to reduce the channel’s conflict. The authors first analyze the effect of different pricing strategies on the retail price, wholesale price and profits. The cooperative strategy is also studied to see how it benefits both parties in the dual channel supply chain. Finally, through a numerical example, it is demonstrated that providing convenience of the direct channel is important for the manufacturer and service is a distinctive advantage for the retailer. Furthermore, the paper shows that if the service quality has a significant effect on the direct channel, then the manufacturer tends to abandon commitment of equal pricing strategy.