Implementing coordination contracts in a manufacturer Stackelberg dual‐channel supply chain

We examine a manufacturer's pricing strategies in a dual‐channel supply chain, in which the manufacturer is a Stackelberg leader and the retailer is a follower. We show the conditions under which the manufacturer and the retailer both prefer a dual‐channel supply chain. We examine the coordination schemes for a dual‐channel supply chain and find that a manufacturer's contract with a wholesale price and a price for the direct channel can coordinate the dual‐channel supply channel, benefiting the retailer but not the manufacturer. We illustrate how such a contract with a complementary agreement, such as a two‐part tariff or a profit‐sharing agreement, can coordinate the dual‐channel supply chain and enable both the manufacturer and the retailer to be a win–win.