Abstract
A price and service competition model for dual-channel supply chain was established, then the optimal solutions including service level and channel profit were compared between single channel and dual-channel supply chain The results revealed that the competition between dual-channel supply chain leaded to zero demand segment of Internet direct channel and more profits for whole supply chain system when traditional retailer adopted service differentiation strategy. Through dual-channel strategy the manufacturer effectively motivated traditional retailer to improve its channel service for more profits. Furthermore, the customer acceptance of Internet direct channel made a significant impact on the profit of manufacturer and retailer in the dual-channel supply chain system.
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