Online channel operation mode: game theoretical analysis from the supply chain power structures

Abstract

Purpose: Dual-channels have been widely used in practice, and the pricing decisions and the online channel operation mode choice have been the core problems in dual-channel supply chain management. This paper focuses on the online channel operation mode choice from the supply chain power structures based on game theoretical analysis. Design/methodology/approach: This paper utilizes three kinds of game theoretical models to analyze the impact of supply chain power structures on the optimal pricing and online channel operation mode choice. Findings: Results derived in this paper indicate that when the self-price elasticity is large, the power structures have no direct impact on the decisions. However, when the self-price elasticity is small and customers’ preference for the online channel is low, then in the MS market, it is better for the retailer to operate the online channel, while in the RS market or in the VN market, it is better for the manufacturer to operate the online channel. Research limitations/implications: In this paper, we do not consider stochastic demand and asymmetric information, which may not well suit the reality. Originality/value: This paper provides a different perspective to analyze the impact of supply chain power structures on the pricing decisions and online channel operation mode choice. The comparison of these two online channel operation modes in this paper is also a unique point.