Business Administration, Management, and Operations Commons^™

Coordinating A Supply Chain With A Manufacturer-Owned Online Channel: A Dual Channel Model Under Price Competition, Jennifer K. Ryan, Daewon Sun, Xuying Zhao

Department of Supply Chain Management and Analytics: Faculty and Staff Publications

We consider a dual channel supply chain in which a manufacturer sells a single product to end-users through both a traditional retail channel and a manufacturer-owned direct online channel. We adopt a commonly used linear demand substitution model in which the mean demand in each channel is a function of the prices in each channel.We model each channel as a news vendor problem, with price and order quantity as decision variables. In addition, the manufacturer must choose the wholesale price to charge to the independent retailer. We analyze the optimal decisions for each channel and prove the existence of a …