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Wilfrid Laurier University School of Business & Economics
September 1, 2014
Canadian Excellence


Business: Operations & Decision Sciences (ODS) Area

Pricing and inventory strategies for a two-stage dual-channel supply chain (ABSTRACT)

Niu, A.R., X. Zhao, I. Castillo, and T. Joro

published: 2011 | Research publication | Refereed Journals - ODS

Niu, A.R., X. Zhao, I. Castillo, and T. Joro (2011). "Pricing and inventory strategies for a two-stage dual-channel supply chain", Asia-Pacific Journal of Operational Research, forthcoming.

ABSTRACT: Most large retail firms are capitalizing on the Internet as a sales channel and have adopted a multi-channel strategy that includes both a web-based channel and a traditional off-line channel. For a supply chain with a dual-channel retailer, competition exists between these two channels; thus, pricing in one channel will affect the demand in the other channel. This subsequently affects the retailer's replenishment (ordering) decisions, which have an impact on the producer's inventory/production plans and wholesale price decisions. It is clear then that pricing decisions and inventory/production decisions are interacting in each member of the supply chain and among the members in the chain as well. Thus, competition and substitution should play important roles for pricing strategies and inventory/production decisions in a supply chain with dual-channel retailers. However, this role is usually ignored. In this paper, we consider joint pricing and inventory/production decision problems for members in a monopoly two-stage dual-channel retailer supply chain. We analyze the problems by incorporating intra-product line price interaction (competition) in the economic order quantity (EOQ) model. We show that a unique equilibrium exists under certain realistic conditions. We also provide numerical results that offer managerial insight for pricing strategies for the dual-channel retailer supply chain and for product design for the different channels.

revised Jul 3/11

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