Pricing Strategies in a Two-Echelon Supply Chain With Sales Efforts and Channel Conflicts

Abstract

With the increasing popularity of online retail, many manufacturers have opened up their own online marketplaces, which has accelerated competition in the retail market. This paper considers a two-echelon supply chain consisting of a manufacturer and a retailer, where the retailer and the manufacturer sell the same product on their respective online platforms. This sales model creates channel conflicts in the supply chain. In order to explore the impact of this kind of conflict and sales efforts on the supply chain, we constructed consumers' utility functions when they buy products in different channels as well as a supply chain profit model where there is channel competition and sales efforts. The results show that the severity of channel conflicts affects consumers' choice of purchasing channels, and excessive channel conflicts will cause consumers to lose interest in shopping, channel conflicts will also make retailers and manufacturers more competitive. In addition, sales efforts can increase channel conflicts. Numerical analysis shows that although channel conflicts weaken the overall profit of the supply chain, it is more beneficial to manufacturers. Finally, we analyze the impact of channel conflicts and sales efforts on consumer surplus. We generate results to provide guidance for the operations of two-echelon supply chains.