Optimal Dual-channel Distribution Configuration of a Manufacturer Under Showrooming

Abstract

We study the channel configuration problem of a monopolistic manufacturer under three dual-channel supply-chain configurations (DCSC). The first DCSC configuration corresponds to the manufacturer, the retailer (brick-and-mortar store) and the e-tailer (online store) who are all independent entities. In the second DCSC configuration, the manufacturer sells through its own brick and mortar stores (company stores) and competes with an independent e-tailer. In the third DCSC configuration, the manufacturer sells through an e-marketplace it owns and competes with an independent retailer. We find the equilibrium profit, price, and demand of each entity. Using numerical analysis, we find the effect of showrooming (examining product at the brick-and-mortar store and then buying from the online store).