Logistics service sharing and competition in a dual-channel e-commerce supply chain

Abstract

Logistics service plays an increasingly important role in e-commerce business. Logistics service sharing (LSS) among e-commerce firms provides more consumers with better service experience, but gives rise to new competition problem. In this paper, we study the LSS and the resulting competition problem in a dual-channel e-commerce supply chain consisting of a manufacturer and a retailer. The manufacturer wholesales products to the retailer who then retails them to consumers, and the manufacturer simultaneously sells the same products to consumers directly. The retailer owns superior logistics service resource, which can be shared with the manufacturer. We model two cases: without LSS and with LSS. For each case, we model the competition problem in this supply chain as a Stackelberg game, where the retailer acts as the leader and the manufacturer acts as the follower. Optimal decisions and profits of each firm as well as consumer surplus and social welfare in each case are provided. We find that compared to the case without LSS, in the case with LSS, the manufacturer’s retail price always increases, but the retailer’s retail price may increase or decrease, depending on the price of the shared logistics service. The profit change of the two firms also depends on the price of the shared logistics service. It is found that the two firms can be Pareto improved by LSS if this price lies in a certain range, which shrinks when the competition intensity increases. The social welfare with LSS will be greater than that without LSS when the price of the shared logistics service is less than a threshold.