Price and quality decisions in dual-channel supply chains

• Published in: European journal of operational research Vol. 259; no. 3; pp. 935 - 948
• Main Authors: Chen, Jingxian, Liang, Liang, Yao, Dong-Qing, Sun, Shengnan
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 16.06.2017
• Subjects: Dual-channel supply chain; Game theory; Pareto zone; Pricing; Product quality; Product quality; Pareto zone; Dual-channel supply chain; Game theory; Pricing
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2016.11.016

•We consider price and quality decisions in a dual-channel supply chain.•We show the impacts of adding a new channel on price, quality and profit.•We identify two Pareto zones of adding a new channel. Since the decision of non-price feature such as product quality draws a little attention in the literature of dual-channel supply chains, this paper investigates price and quality decisions in dual-channel supply chains, in which a single product is delivered through a retail channel, a direct channel, or a dual channel with both retail and direct channels. Considering the supply chains can be centralized or decentralized, we demonstrate that quality improvement can be realized when a new channel is introduced. Moreover, we employ two themes in terms of channel-adding Pareto zone to characterize the impacts of channel structures on supply-chain performance, including the whole system's profit (for the centralized system), each player's profit (for the decentralized system), and consumer surplus. When price and quality decisions are considered, we find the supply chain performance could be improved due to a new channel augmented. Moreover, we show the effects of the quality sensitivity parameters of different channels on price and product quality, as well as profits and consumer surplus.