Pricing and coordination strategies of a dual-channel supply chain considering green quality and sales effort

Abstract

Due to the rapid growth of the internet and smartphone users, the shopping behavior of customers is changing towards online purchasing. Hence, a manufacturer would like to include an online (direct) channel along with offline (indirect) channel. This study investigates the pricing strategies and coordination mechanism between the members in a dual-channel supply chain (DCSC). A manufacturer offers a new substitutable green (eco-friendly) product through a direct channel and a non-green (traditional) product through an offline retail channel. The demand is expressed as a linear function of selling (online/offline) prices, green quality level, and sales effort level. In this study, three models (centralized, decentralized, and collaboration) have been examined in the DCSC. A Stackelberg game-theoretic approach is applied to analyze the decentralized model, and the channel coordination is achieved through the surplus profit-sharing mechanism to obtain a win-win situation for each member of the supply chain. The optimal results are compared, and a sensitivity analysis is carried out to study the effect of some key parameters. It is revealed that the green quality level is high in the collaboration model, which is beneficial from the environmental perspective.