OPTIMAL PRICING STRATEGY IN A DUAL-CHANNEL SUPPLY CHAIN: A TWO-PERIOD GAME ANALYSIS

Abstract

With the development of e-commerce and the rapid updating of products, multi-period pricing has been widely attempted in dual-channel supply chains. In this paper, we develop a two-period game-theoretical model to investigate the problem of two-period pricing and strategy choice for a dualchannel supply chain in which a manufacturer sells a product through its direct channel and an independent retailer. The two common pricing strategies, i.e., dynamic pricing and preannounced pricing, are considered. Through analyzing and comparing, we derive a unique Stackelberg equilibrium under the two pricing strategies and find that dynamic pricing dominates preannounced pricing and achieves a win-win result for the retailer and the manufacturer. Moreover, under this strategy, the manufacturer charges a higher or lower direct price in the second period than in the first period depending on channel competition, whereas the retailer always set a lower retail price in the second period. Finally, we extend our models to consider a unique wholesale pricing strategy, the profit discount factor, and different decision sequences for the selling prices of the two channels. We show that our main results are robust, except that the decision sequence changes the optimal pricing strategy choice of the retailer.