Two-Step Pricing Decision Models for Manufacturer-Led Dual-Channel Supply Chains

Abstract

In this paper, we study the optimal profit change in a manufacturer-led dual-channel supply chain under centralized decision-making and decentralized decision-making scenarios. The supply chain is composed of only a single supplier, a manufacturer, and a retailer, and the manufacturer plays a leading role in the supply chain. Meanwhile, the following conditions exist simultaneously: the promotion levels of retailers in offline physical stores, the promotion compensation given by manufacturers to retailers, and channel competition. In order to coordinate the profits of channel members, a two-step pricing decision model is established. This research shows that using a two-step pricing decision model can make the retailer’s optimal promotion fees and the manufacturer’s optimal sales compensation fees the same as the centralized decision-making’s optimal values; however, the results are not good, because after the coordination, the retailer’s profits increase and the manufacturer’s profits decrease, and, as a consequence, the retailer needs to pay a fixed fee to the manufacturer within the validity of the contract, which is signed by both sides, to achieve a win–win situation for the channel members.