The Effect of Difference in Service Qualities on a Dual-Channel Supply Chain

Abstract

The rapid development of E-commerce has prompted many manufacturer to distribute their products through Internet directly to consumers as well as traditional retailers. In this dual- channel supply chain the manufacturer decides the wholesale and the direct channel's price and the retailer decides the retail price. We provide the equilibrium pricing strategies of the manufacturer as well as the retailer and study the effect of the difference in service qualities of the two channels on the equilibrium prices, demands, profits and total profit of the supply chain and find that when the difference increases these equilibrium levels of the retailer all increase and these of the manufacturer, except for the direct price which is unchanged, all decrease, furthermore the change of the total profit of the supply chain depends on the relative value of the difference in service qualities to difference in selling costs of the two channels.