The impact of product category on pricing decision in a two-echelon dual-channel supply chain

This paper studies a two-echelon dual-channel supply chain system in which a manufacturer sells a single product to customers through its owned online channel and an independent retailer. We consider a Stackelberg game model where the manufacturer (the leader) announces the online channel price and wholesale price. In the response, the retailer (the follower) decides a retail price to maximize its retail profit. Potential consumers choose the purchase channel based on price and their acceptance of web-based purchases. Our main interest is to analyze how the different type of products may affect the optimal pricing decisions for each player when all potential consumers differ in their willingness to buy the product and preference to buy from online. Due to complexity of the problem, we use an agent-based modeling approach to investigate this issue. Our numerical results show that the optimal prices are significantly different from those prices of the base model. Our results prove that product category has a great influence on the market segment, which consequently affect the demand of both channels obviously.