TITLE:
Altruism and Pricing Strategy in Dual-Channel Supply Chains
AUTHORS:
Kuiran Shi, Feng Jiang, Qi Ouyang
KEYWORDS:
Altruism; Dual-Channel Supply Chain; Pricing Strategy; Product Web-Fit
JOURNAL NAME:
American Journal of Operations Research,
Vol.3 No.4,
July
16,
2013
ABSTRACT: With the development of behavioral operational management, human behavior such as altruism, fairness and trust has received considerable attention. This paper studies the effect of altruism on retailer’s and manufacturer’s pricing strategy in two classic dual-channel supply chains by presenting Stackelberg game models. The analysis shows that the player’s altruism preference strongly affects their pricing strategies. The more altruistic one player is, the more profits the other player obtains. Moreover, the effect of manufacturer’s altruistic preference is larger than that of retailer’s. In addition, online price is always lower than offline price in dual-channel supply chain, which still holds true considering altruism. The results also reveal that the product web-fit has significant effect on the player’s optimal pricing strategies. The more compatible with online market the product is, the lower the retail price is set, and the more profit the manufacturer obtains whereas the less the retailer gets.