When should supply chain members adopt drop-shipping channels?

There are many excellent features about drop–shipping. However, the focus of this article is on analysing how drop–shipping will affect the supply chain members' payoffs, and hence their incentive to adopt drop–shipping. So, we are interested in finding answers to the following questions: how will the supply chain members' payoffs be affected when moving from traditional channel to drop“shipping channel” Will anyone be worse or better off, or can everyone be better off“ Under what conditions will they be worse or better off” We find the cases under which retailer and vendor, both agree to adopt the drop–shipping channel. Sometimes, even if supply chain total expected payoff is smaller in drop–shipping channel than in the traditional channel, it is still possible for them to achieve Pareto improving payoffs by adopting drop–shipping channel, provided that risk sharing is allowed.