Cooperation model with direct and retail channels

Manufacturers today are increasingly adopting a direct online channel to sell their products. Empirical studies have shown that service quality even goes beyond product price as one of the major factors influencing consumers´ acceptance of the direct channel. But due to lack of manpower resources and material resources, manufacturer will spend much more service costs than retailer to receive the same service quality. In this paper, we assume that service costs is valued by the service sensitivity of consumer, and thus manufacturer and retailer should share service costs together through the proportion of k which is strictly determined by service sensitivity of consumer. Finally, we present a cooperation model for centralized or decentralized dual-channel supply chain.