Optimizing the competitive service and pricing decisions of dual retailing channels: A combined coordination model

Abstract

In recent decades, many firms have broadened their single-channel supply chains (SCs) into dual-channel supply chains (DSCs), endeavoring to gain more market shares. However, due to the resulting competitive situation, the successful performance of DSCs is closely related to the marketing activities conducted by the competitive channels. This study explores the optimality of competitive green service and pricing decisions of the retailing channels of a consumer electronics DSC; therefore, it contributes to the literature on dual-channel systems coordination which often focuses on optimizing the price-only strategies. Since the pricing decisions of the involved parties is a key issue affecting the level of services, this study proposes a combined two-part tariff contract to simultaneously optimize these decisions so that the sustainability targets of the system are met. Moreover, it uncovers the environmental and economic benefits of utilizing warranty replacement service of the online channel of DSC in favor of promoting demand and closing the online loop, in contrast to the prior studies, which have often investigated the demand-promotion effects of warranty. Results of implementing the model showed that the coordination scheme is sophisticated enough to synchronize the economic, environmental, and social gains of the system, leading to significant improvements in the performance indices. The results provide the DSC managers with insights into the way of optimizing the DSC marketing decisions and also utilizing warranty services towards achieving environmental and economic aims in the industries where providing warranty is an indispensable strategy.