Article ID: | iaor201110442 |
Volume: | 217 |
Issue: | 1 |
Start Page Number: | 75 |
End Page Number: | 83 |
Publication Date: | Feb 2012 |
Journal: | European Journal of Operational Research |
Authors: | Xiong Yu, Yan Wei, Fernandes Kiran, Xiong Zhong-Kai, Guo Nian |
Keywords: | game theory, simulation: applications |
In durable goods markets, many brand name manufacturers, including IBM, HP, Epson, and Lenovo, have adopted dual‐channel supply chains to market their products. There is scant literature, however, addressing the product durability and its impact on players’ optimal strategies in a dual‐channel supply chain. To fill this void, we consider a two‐period dual‐channel model in which a manufacturer sells a durable product directly through both a manufacturer‐owned e‐channel and an independent dealer who adopts a mix of selling and leasing to consumers. Our results show that the manufacturer begins encroaching into the market in Period 1, but the dealer starts withdrawing from the retail channel in Period 2. Moreover, as the direct selling cost decreases, the equilibrium quantities and wholesale prices become quite angular and often nonmonotonic. Among other results, we find that both the dealer and the supply chain may benefit from the manufacturer’s encroachment. Our results also indicate that both the market structure and the nature of competition have an important impact on the player’s (dealer’s) optimal choice of leasing and selling.