Impact of Consumer Green Preferences on Pricing Decisions in Dual-Channel Supply Chains: A Complex Systems-Based Dynamic Game Analysis

Due to growing concerns for environmental problems and food quality, consumers pay more attention to the carbon emission and freshness of fresh food. The booming e-commerce also accelerates the development of the dual-channel supply chain. In the dual-channel supply chain of fresh food, the carbon emission and freshness of fresh food are becoming important factors affecting consumers’ purchase demand. This paper focuses on the optimal decision of carbon emission reduction and pricing, which is investigated by a Stackelberg game-theoretic approach in three dual-channel supply chain sales models (retailer dual channel, producer dual channel, and mixed dual channel). A two-stage fresh food supply chain system composed of a producer and a retailer is explored. The sensitivity analysis and the comparison of three dual-channel models are carried out. The results show the following: (1) the sales price, carbon emission reduction, market demand, producer’s profit, retailer’s profit, and supply chain’s profit of fresh food under the three dual-channel supply chains show the same change on different levels of consumers’ low-carbon preference coefficient and freshness level, respectively; (2) the optimal decision of carbon emission reduction and pricing, demand, and profit of the three dual-channel models need to be determined according to the value of consumers’ purchasing preferences for the retailer’s offline channel. The paper gives some enlightenment to the decision-making members in the fresh dual-channel supply chain.

In dual-channel supply chain, in order to alleviate the possibility of channel conflict, the retailer is allowed to add value to the product at a cost. In the symmetric and asymmetric information framework with value-added cost, the Stackelberg model between the two parties where the manufacturer acts axis the leader in dual-channel supply chain is proposed. The paper identifies the optimal pricing and coordination decision decisions of the retailer and manufacturer, discussing the value for two parties in condition that the retailer shares the value-added cost information with the manufacturer. It shows that the manufacturer would always benefit in the sharing the cost information. The retail would be willing to share information with the manufacturer if her cost of adding value is lower than a threshold value.1.

The interests of upstream, midstream, downstream companies and consumers in the supply chain are jointly affected by service levels and returns. Improving service levels can increase market demand and improve market position, as well as reduce return rates. But the increase in service level will bring an increase in service cost. How to balance the service cost and return cost through pricing decision, so that the profit of supply chain members can be improved, is the problem studied in this paper. In this paper, we consider the effect of service level of network channel on consumers’ return behavior in the context of manufacturer’s dual-channel supply chain when dual channels provide services at the same time, and discuss the effect of service level and return rate on pricing decision of dual-channel supply chain. It was found that return behavior can stimulate manufacturers to improve service levels and increase overall supply chain profits. The higher the return rate in the network channel, the greater the benefits from improved service levels by the manufacturer and the less detrimental to retailers’ returns. This study enriches the research on pricing decisions in dual-channel supply chains, increases the motivation of merchants to improve service levels, and has some guiding implications for supply chain members to develop price and service strategies.

Dual-channel supply chain structure, i.e., a traditional retail channel added by an online direct channel, is widely adopted by a lot of firms, including some companies selling deteriorating products (e.g. fruits, vegetables and meats, etc.). However, few papers in literature consider deterioration property of products in dual-channel business models. In this paper, a single-retailer-single-vendor dual-channel supply chain model is studied, in which the vendor sells deteriorating products through its direct online channel and the indirect retail channel. In addition to quantity deterioration, quality of the products also drops with time and affects the demand rate in the retail channel. The pricing decisions and the inventory decisions for the two firms are simultaneously studied. Models of centralized (i.e., the two firms make decisions jointly) and decentralized (i.e., the two firms make decisions separately, vendor as the Stackelberg leader) problems are established. Proper algorithms are proposed to obtain the optimal decisions of prices, ordering frequencies and ordering quantities. The results suggest that decentralization of the supply chain not only erodes the two firms’ profit, but also incurs higher wastes comparing to that under centralization. However, a revenue sharing and two part tariff contract can coordinate the supply chain. Under utilizing the contract, each firm’s profit is improved and the total waste rate of the supply chain is reduced. It is also shown that the contract is more efficient for both firms under higher product deterioration rate. Besides, the contract is more efficient for the retailer, while less efficient for the vendor under higher quality dropping rate. In the model extension, online channel delivery time is assumed to be endogenous and linked to demands in both channels. The results show that products’ deterioration rate and quality dropping rate have significant impacts to the firms’ delivery time decisions, as well as the pricing and inventory decisions.

Corporate social responsibility (CSR) has received much of the attention in supply chain management, in particular the pricing decisions. Most existing models that enable CSR integration into pricing decisions in a supply chain context assume deterministic demand and focus on a single distribution channel. Despite the fact that dual-channel supply chain (DCSC) has received popularity, most pricing decisions models in DCSC assume fixed and deterministic market share distribution between channels, and no demand leakages (cannibalization). This paper addresses these gaps by proposing a CSR enabled DCSC model pricing in which the demand is considered to be stochastic and market share distribution between channels in DCSC is optimally determined using a differentiation price, and the impact of demand leakages is also taken into consideration. Unlike existing studies, which only enable pricing decisions due to deterministic demand consideration, comprehensive DCSC models are proposed that provide joint decisions framework on CSR investment, pricing, and inventories. We have also considered the extension of the demand scenario when the distribution of demand is unknown. The two most common coordination schemes, the centralized (integrated) and the decentralized coordination is explored for the three demand situations: (i) deterministic demand; (ii) stochastic with full information; and (iii) stochastic with partial information. We are able to find analytical (closed-form) solutions for most demand situations. The centralized coordination performed better compared to the decentralized for all demand scenarios. The models are benchmarked when the demand is stochastic with known and unknown distributions, as well as, the case of the deterministic demand. A detailed numerical analysis is also presented in order to study the impact of using the price differentiation for market segmentation, the demand leakage, and partial knowledge on the stochastic demand on the players’ decisions and revenues in the supply chain.

With the rapid popularization of online shopping, more and more enterprises adopt dual-channel supply chain structures, and information sharing plays an important role in the implementation of dual-channel supply chain management. Most of the existing literature has investigated one-way information sharing from the retailer to the manufacturer, whereas few studies on two-way information sharing between the manufacturer and retailer in a dual-channel supply chain have been explored. A dual-channel supply chain consisting of a manufacturer and a retailer, both of whom have private information about consumer preference and service cost was considered in this study. Game-theoretic models were developed to investigate the decision-making problem of dual-channel members in two information-sharing scenarios including non-information sharing and information sharing respectively. Furthermore, the impact of the manufacturer's information forecast capability on the sale price, service level, and profits were analyzed through numerical example. Results show that information sharing can increase the wholesale price, sale price, and online service level; furthermore, information sharing not always be beneficial for dual-channel supply chain members. When the information forecast capability of the manufacturer is relatively weak, information sharing can increase supply chain members' profits. On the contrary, information sharing may not always increase his profits. Additionally, the retailer cannot benefit from information sharing in any cases, which accounts for his weak willingness to share information with the manufacturer. This study provides a significant reference for decision-making. Keywords: dual-channel supply chain; information sharing; price decisions; service decisions

We study the strategic pricing decision models of manufacture-led dual-channel supply chains with the free-rider problem under the service level and cost. We use the Stackelberg model to study the impact of the degree with the free-rider problem of consumers on the optimal pricing strategy and the optimal service level of the dual-channel supply chain under various decision-making modes and carry out a numerical simulation. The main conclusions are as follows: In the retailer’s dual-channel supply chain, the deepening of consumer free-riding behavior will reduce the enthusiasm of retailers, but the weak position of the channel will lead to improved service levels and reduced prices, as well as to increase the wholesale price to cover costs. In the manufacturer’s dual-channel supply chain, the deepening of consumer free-riding behavior will lead to a decline in the retailers’ service level and enthusiasm, as well as to a decrease in the wholesale prices and retailers’ pricing. In the two types of dual-channel supply chains, the demand of manufacturers’ network channels increases, the price increases first and then decreases, and the profits of all supply chain members decrease with the increase in the free-rider coefficient of consumers. Finally, we use numerical simulation to verify the validity of the above conclusions, which provides a scientific basis to make optimal pricing decisions in the manufacturer-led dual-channel supply chain.

Information sharing is the premise of the stable operation and win-win cooperation of the dual-channel agricultural supply chain. To arouse the enthusiasm of information sharing, this paper studies the incentive mechanism of information sharing of dual-channel agricultural product supply chain. The invention problem-solving theory (TRIZ) is adopted to analyze the functional model, the key problems, and the available resources of a dual-channel agricultural supply chain information sharing system. By using the invention principles of the conflict resolution theory, such as separation, precompensation, and feedback, the point bank reward mechanism and the risk evaluation and control mechanism of information sharing are proposed. TRIZ theory provides a new research method and incentive measure for effectively mobilizing the enthusiasm of information sharing.

In the face of demand disruptions, dual-channel supply chains (SCs) that lack resilience may be more vulnerable. Reaching moderate SC resilience through coordination is essential for dealing with disruptions. This paper investigates the operation management of a dual-channel fresh-food SC (FSC) under disruption. The centralized and decentralized decision models propose joint quality efforts based on the consideration of quality preference and loss. From the perspective of SC resilience, we analyze how SC members can optimally make price, quality, and quantity decisions resiliently and robustly under the disruption of quality preference. The results show that (1) no matter the kind of decision model, considering quality preference disruptions can significantly increase the SC profit; (2) there is a resilience range in decisions with the influence of the disruption cost. The original optimal decisions in the resilience range are robust and sustain SC performance without change; and (3) the disruption significantly impacts offline channel retailers, who are at a disadvantage when competing with online channels. A centralized decision model can achieve higher profits and quality levels in response to demand disruptions. This paper extends the concept of resilience to the FSC and provides suggestions for fresh-food enterprises to conduct quality efforts and cope with demand interruption.

Coordinating a dual-channel supply chain with risk-averse under a two-way revenue sharing contract

Today, many manufacturers are opening their own online store to neutralize power of dominant retailers. In a dual-channel supply chain, the manufacturer sells his product through a physical retailer as well as an online channel. It is assumed that a dominant physical retailer acts as a leader and proposes his dollar-markup policy and the manufacturer, as a follower, will decide on the wholesale price and online price based on the retailer’s agreed markup. We employ a game-theoretical analysis between the manufacturer and physical retailer, and derive a subgame perfect equilibrium. The results show that customers’ channel preference has a significant impact on the manufacturer decision on adopting an online channel. Contrary to the traditional perception, we show that there exists a Pareto-zone for customers’ channel preference in which both the manufacturer and retailer benefit from a dual-channel supply chain.

This paper considers a retailer-manufacturer dual-channel supply chain (DCSC) consisting of a retail channel and a direct sale channel. Previous literature has shown that either asymmetric reference effect (ARE) or information sharing (IS) significantly impacts customers’ demand, then the channel members’ pricing decisions. As yet, no literature has examined the joint effect of both on the channel members’ pricing decisions, especially in a DCSC. To fill up the deficiency, we first explore and compare the pricing decisions in a centralized and a decentralized DCSC with ARE, respectively, with and without IS, using the Stackelberg game and two-stage optimization technique. Then we evaluate the values of ARE and IS by introducing model misspecification and numerical experiments. We find that substantial revenue will be lost if the retailer ignores ARE when information is shared than not shared, especially when the channel members are pessimistic about the market. A higher reference price or a weaker ARE induces the channel members to increase prices, and make IS more valuable to them. Besides, whether the information is shared or not, channel members generally underestimate revenues under a relatively high reference price, while overestimating the revenues under a relatively small reference price. Furthermore, the manufacturer conditionally accepts the IS while the retailer always accepts it.

Price and lead time decisions in dual-channel supply chains

Pricing and production decisions in dual-channel supply chains with demand disruptions

With the rapid development of e-commerce, the online channels encroaching on the offline sales market are becoming more serious, which will definitely harm the offline market. Moreover, there exists a certain percentage of consumers (mostly elderly people) who are not able to purchase online because they lack digital skills. Therefore, understanding the impact of the purchase channel preference and service level on pricing decisions is vital for the dual-channel supply chain management. Focusing on the channel preference and service level, we first develop an optimal pricing model containing centralized and decentralized decision-making for an online and offline retailer by deploying the Stackelberg game. We first develop a Stackleberg game to capture such a dual-channel supply chain with the offline channel preference and service level. Secondly, under centralized decision-making, we derive the optimal retail prices and obtain the optimal total profit. Thirdly, under decentralized decision-making, we obtain the optimal retail prices and optimal total profit as well. Moreover, extensive monotonicity properties when system parameters change are obtained. Relying on the theoretical results, firstly, we show that the improvement of the offline service level would lead to higher pricing of the commodities for both online and offline channels. From our numerical results, when the service level is improved, the offline and online optimal pricing increases by 47.5% and 31.1%, respectively, which may contradict the conventional belief that the improvement of one channel would harm another one. Secondly, we demonstrate that the benefit of improving the offline service level has a diminishing marginal effect. The numerical results show that when the current service level is low, the effectives of improving the service level is roughly five times that when the service level is high. This indicates that the investment in improving the offline service level should not be unlimited. Thirdly, we show that the pricing decision under centralized decision-making should be adopted with the existence of both the offline channel preference and offline service.