TITLE:
Consumer Choice, Firm Performance and Channel Coordination in a Dual-Channel Distribution System
AUTHORS:
Wei Song, Renwen Wang, Yelin Fu, Xiaobao Peng
KEYWORDS:
Dual-Channel, Encroachment, Consumer Choice, Win-Win Zone, Game Theory, Channel Coordination
JOURNAL NAME:
American Journal of Operations Research,
Vol.4 No.4,
July
10,
2014
ABSTRACT: The expanding role of the Internet in consumer purchasing activities has
created substantial new opportunities accessing to end-consumers. More and more
manufacturers are beginning to sell products to potential consumers directly
online while continuing to sell through the traditional brick-and-mortar
retailers, a phenomenon leading to intense channel competition and conflicts. Using
game theory, this research examines the effect of market segments, consumer
choice and the acceptance of direct online channels on firm performance and the
whole system’s profit. The analysis indicates that the addition of direct
online channel does not necessarily harm the incumbent retailers. A win-win
zone is proposed, in which both the manufacturer and the retailer benefit
from the encroachment.