Optimal distribution strategy and online channel mode by considering retailer's fairness concerns

Xuemei Zhang; Chenhao Ma; Jiawei Hu; Wei Shi

doi:10.3934/jimo.2022069

Article Contents

2023, Volume 19, Issue 4: 2889-2914. Doi: 10.3934/jimo.2022069

This issue Previous Article Optimal control on investment and reinsurance strategies with delay and common shock dependence in a jump-diffusion financial market Next Article Financial risk contagion and optimal control

Optimal distribution strategy and online channel mode by considering retailer's fairness concerns

School of Business, Fuyang Normal University, Anhui Provincial Key Laboratory, Regional Logistics Planning and Modern Logistics Engineering, Fuyang Normal University, Fuyang, Anhui 236037, China

^*Corresponding author: Wei Shi
^*Corresponding author: Wei Shi

Received: July 2021

Revised: February 2022

Published: April 2023

Abstract Full Text(HTML) Figure(7) / Table(1) Related Papers Cited by

Abstract

In supply chain systems, when retailers have fairness concerns behavior, how to choose distribution strategy and online channel mode is significant to improve the operation efficiency of the supply chain systems. A game theory is used to model the competitive relationship between a manufacturer and a retailer or an E-commerce platform in a dual-channel supply chain. The manufacturer can sell high-quality or low-quality products through online or offline channel. The manufacturer can directly sell products to consumers by himself or the E-commerce platform through the online channel. The manufacturer also can wholesale products to retailers and then retailers sell products to consumers through the online channel. Combining the two distribution strategies and three online channel modes, six dynamic models are constructed to analyze the effect of retailer's vertical and horizontal fairness concerns on the decisions of supply chain members. The results show that: the manufacturer direct selling mode and distribution strategy of selling high-quality or low-quality products through offline or online channel is better for the manufacturer and supply chain system under most conditions, which will damage the retailer's benefit. The retailer's fairness concerns do not affect the pricing strategy and consumer demands, and they do not necessarily bring more benefits to the retailer. When the E-commerce platform sets an appropriate commission fee, the agency selling mode is the best choice for supply chain members.

Keywords:

Mathematics Subject Classification: Primary: 90B60; Secondary: 90B06.

Citation:

Full Text(HTML)

Figure 1. Structure of six models in a dual-channel supply chain

Download: Full-size image PowerPoint slide

Figure 2. Impact of $ \lambda $ and $ \gamma $ on M's profit

Download: Full-size image PowerPoint slide

Figure 3. Impact of $ \lambda $ and $ \gamma $ on R's utility

Download: Full-size image PowerPoint slide

Figure 4. Impact of $ \lambda $ and $ \gamma $ on supply chain's profit

Download: Full-size image PowerPoint slide

Figure 5. Impact of $ k $ on M's profit

Download: Full-size image PowerPoint slide

Figure 6. Impact of $ k $ on R's utility

Download: Full-size image PowerPoint slide

Figure 7. Impact of $ \lambda $ and $ \gamma $ on supply chain's profit

Download: Full-size image PowerPoint slide

Table 1. Symbols and notations

Notations	Definition
$ i $	Model $ i $, $ i\in\{MHL, MLH, RHL, RLH, AHL, ALH\} $
$ n $	Product $ n $, $ n\in\{H, L\} $
$ j $	Supply chain member $ j $, $ j\in\{M, R, E\} $
$ Q $	Basic market demand
$ \alpha $	Product quality elasticity coefficient
$ q $	Quality level of high-quality products
$ \theta $	Degree of quality differentiation between two products
$ k $	Unit commission fee
$ \lambda $	Vertical fairness concern coefficient
$ \gamma $	Horizontal fairness concern coefficient
$ w_{n}^{i} $	Unit wholesale price of product $ n $ in model $ i $
$ p_{n}^{i} $	Unit retail price of product $ n $ in model $ i $
$ D_{n}^{i} $	Demand of product $ n $ in model $ i $
$ \pi_{j}^{i} $	Profit of supply chain member $ j $ in model $ i $
$ U_{R}^{i} $	R's utility in model $ i $

| Show Table

DownLoad: CSV

Related Papers

Cited by

References

[1]	China Internet Network Information Center (CNNIC), The 45th China Statistical Report on Internet Development, China Internet Network Information Center (CNNIC), 2020. Available from: http://www.cac.gov.cn/2020-04/27/c_1589535470378587.htm.
[2]	V. Abhishek, K. Jerath and Z. J. Zhang, Agency selling or reselling? Channel structures in electronic retailing, Management Science, 62 (2015), 2149-2455. doi: 10.1287/mnsc.2015.2230.
[3]	A. Adhikari and A. Bisi, Collaboration, bargaining, and fairness concern for a green apparel supply chain: An emerging economy perspective, Transportation Research Part E: Logistics and Transportation Review, 135 (2020), 101863. doi: 10.1016/j.tre.2020.101863.
[4]	M. S. Altug, Supply chain contracting for vertically differentiated products, International J. Production Economics, 171 (2016), 34-45. doi: 10.1016/j.ijpe.2015.10.014.
[5]	Z. A. Cil, Z.X. Li, S. Mete and E. Özceylan, Mathematical model and bee algorithms for mixed-model assemble line balancing problem with physical human-robot collaboration, Applied Soft Computing, 93 (2020), 106394. doi: 10.1016/j.asoc.2020.106394.
[6]	B. Dan, G. Y. Xu and C. Liu, Pricing policies in a dual-channel supply chain with retail services, International J. of Production Economics, 139 (2012), 312-320. doi: 10.1016/j.ijpe.2012.05.014.
[7]	S. Du, T. Nie, C. Chu and Y. Yu, Newsvendor model for a dynamic supply chain with Nash bargaining fairness concerns, International J. Production Research, 52 (2014), 5070-5085. doi: 10.1080/00207543.2014.895446.
[8]	S. Gallino and A. Moreno, Integration of online and offline channels in retail: The impact of sharing reliable inventory availability information, Management Science, 60 (2014), 1434-1451. doi: 10.1287/mnsc.2014.1951.
[9]	A. Goli, H. K. Zare, R. Tavakkoli-Moghaddam and A. Sadeghieh, Hybrid artificial intelligence and robust optimization for a multi-objective product portfolio problem case study: the dairy products industry, Computers & Industrial Engineering, 137 (2019), 106090. doi: 10.1016/j.cie.2019.106090.
[10]	A. Ha, X. Y. Long and J. Nasiry, Quality in supply chain encroachment, Manufacturing & Service Operations Management, 18 (2015), 177-307. doi: 10.1287/msom.2015.0562.
[11]	P. He, Y. He and H. Xu, Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy, International J. Production Economics, 213 (2019), 108-123. doi: 10.1016/j.ijpe.2019.03.013.
[12]	J. Heydari, K. Govindan and A. Aslani, Pricing and greening decisions in a three-tier dual channel supply chain, International J. Production Economics, 217 (2019), 185-196. doi: 10.1016/j.ijpe.2018.11.012.
[13]	S. M. Hosseini-Motlagh, T. M. Choi, M. Johari and M. Nouri-Harzvili, A profit surplus distribution mechanism for supply chain coordination: An evolutionary game-theoretic analysis, European J. Oper. Res., 301 (2022), 561-575. doi: 10.1016/j.ejor.2021.10.059.
[14]	S. -M. Hosseini-Motlagh, M. Johari, S. Ebrahimi and P. Rogetzer, Competitive channels coordination in a closed-loop supply chain based on energy-saving effort and cost-tariff contract, Computers & Industrial Engineering, 149 (2020), 106763. doi: 10.1016/j.cie.2020.106763.
[15]	S. M. Hosseni-Motlagh, M. Nouri-Harzvili and T. M. Choi, Reservice supply chain systems optimization with dual channel and demand disruptions: Sustainability, CSR investment and pricing coordination, Inform. Sci., 503 (2019), 606-634. doi: 10.1016/j.ins.2019.07.021.
[16]	R. Hou, Y. Zhao, M. Zhu and X. Lin, Price and quality decisions in a vertically-differentiated supply chain with an "Online-to-Store" channel, J. Retailing and Consumer Services, 62 (2021), 102593. doi: 10.1016/j.jretconser.2021.102593.
[17]	K. Jerath, S. H. Kim and R. Swinney, Swinney product quality in a distribution channel with inventory risk, Marketing Science, 36 (2017), 747-761. doi: 10.1287/mksc.2017.1041.
[18]	H. Kim, M. H. Ryu, D. Lee and J. H. Kim, Should a small-sized store have both online and offline channels? An efficiency analysis of the O2O platform strategy, J. Retailing and Consumer Service, 64 (2022), 102823. doi: 10.1016/j.jretconser.2021.102823.
[19]	Y. Q. Lan, Y. Z. Li and F. Papier, Competition and coordination in a three-tier supply chain with differentiated channels, European J. Oper. Res., 269 (2018), 870-882. doi: 10.1016/j.ejor.2018.02.032.
[20]	D. M. Li, A. Nagurney and M. Yu, Consumer learning of product quality with time delay: Insights from spatial price equilibrium models with differentiated products, Omega, 81 (2018), 150-168. doi: 10.1016/j.omega.2017.10.007.
[21]	T. T. Li, J. X. Xie, X. B. Zhao and J. F. Tang, On supplier encroachment with retailer's fairness concerns, Computers & Industrial Engineering, 98 (2016), 499-512. doi: 10.2139/ssrn.2204050.
[22]	W. Li and J. Chen, Pricing and quality competition in a brand-differentiated supply chain, International J. Production Economics, 202 (2018), 97-108. doi: 10.1016/j.ijpe.2018.04.026.
[23]	Q. Liu and D. Zhang, Dynamic pricing competition with strategic customers under vertical product differentiation, Management Science, 59 (2013), 84-101. doi: 10.1287/mnsc.1120.1564.
[24]	X. Lin, Y. W. Zhou and R. Hou, Impact of a "buy-online-and-pickup-in-store" channel on price and quality decisions in a supply chain, European J. Oper. Res., 294 (2021), 922-935. doi: 10.1016/j.ejor.2020.03.064.
[25]	Z. Liu, K. W. Li, J. Tang, B. G. Gong and J. Huang, Optimal operations of a closed-loop supply chain under a dual regulation, International J. of Production Economics, 233 (2021), 107997. doi: 10.1016/j.ijpe.2020.107991.
[26]	Z. Liu, X. X. Zheng, D. F. Li, C. N. Liao and J. B. Sheu, A novel cooperative game-based method to coordinate a sustainable supply chain under psychological uncertainty in fairness concerns, Transportation Research Part E: Logistics and Transportation Review, 147 (2021), 102237. doi: 10.1016/j.tre.2021.102237.
[27]	S. K. Mukhopadhyay, X. Zhu and X. Yue, Optimal contract design for mixed channels under information asymmetry, Production & Operations Management, 17 (2010), 641-650. doi: 10.3401/poms.1080.0069.
[28]	T. Nie and S. Du, Dual-fairness supply chain with quantity discount contracts, European J. Oper. Res., 258 (2017), 491-500. doi: 10.1016/j.ejor.2016.08.051.
[29]	R. Olbrich, H. C. Jansen and M. Hundt, Effects of pricing strategies and product quality on private label and national brand performance, J. Retailing and Consumer Services, 34 (2017), 294-301. doi: 10.1016/j.jretconser.2016.01.012.
[30]	K. W. Pan, Z. B. Cui, A. Xing and Q. H. Lu, Impact of fairness concern on retailer-dominated supply chain, Computers & Industrial Engineering, 139 (2020), 106209. doi: 10.1016/j.cie.2019.106209.
[31]	X. J. Pu, S. X. Sun and J. Shao, Direct selling, reselling, or agency selling? Manufacturer's online distribution strategies and their impact, International J. Electronic Commerce, 24 (2020), 232-254. doi: 10.1080/10864415.2020.1715530.
[32]	A. Sharma, G. Dwivedi and A. Singh, Game-theoretic analysis of a two-echelon supply chain with option contract under fairness concerns, Computers & Industrial Engineering, 137 (2019), 106096. doi: 10.1016/j.cie.2019.106096.
[33]	A. A. Taleizadeh, F. Akhavizadegan and J. Ansarifar, Pricing and quality level decisions of substitutable products in online and traditional selling channels: Game-theoretical approaches, Int. Trans. Oper. Res., 26 (2019), 1718-1751. doi: 10.1111/itor.12487.
[34]	E. B. Tirkolaee, M. Alinaghian, A. A. R. Hosseinabadi, M. B. Sasi and A. K. Sangaiah, An improved ant colony optimization for the multi-trip capacitated arc routing problem, Computers & Electrical Engineering, 77 (2019), 457-470. doi: 10.1016/j.compeleceng.2018.01.040.
[35]	S. J. Wang, Q. Y. Hu and W. Q. Liu, Price and quality-based competition and channel structure with consumer loyalty, European J. Oper. Res., 262 (2017), 563-574. doi: 10.1016/j.ejor.2017.03.052.
[36]	L. Xiao, X. J. Wang and K. S. Chin, Trade-in strategies in retail channel and dual-channel closed-loop supply chain with remanufacturing, Transportation Research Part E: Logistics and Transportation Review, 136 (2020), 101898. doi: 10.1016/j.tre.2020.101898.
[37]	R. L. Yan and Z. Pei, The strategic value of cooperative advertising in the dual-channel competition, International J. Electronic Commerce, 19 (2019), 118-143. doi: 10.1080/10864415.2015.1000225.
[38]	X. Yan, H. Y. Chong, J. Zhou, Z. H. Sheng and F. Xu, Fairness preference based decision-making model for concession period in PPP projects, J. Ind. Manag. Optim., 16 (2020), 11-23. doi: 10.3934/jimo.2018137.
[39]	T. F. Ye and Y. Zhao, Quality choice and capacity rationing in advance selling, J. Ind. Manag. Optim., 17 (2021), 3049-3084. doi: 10.3934/jimo.2020107.
[40]	R. Yoshihara and N. Matsubayashi, Channel coordination between manufacturers and competing retailers with fairness concerns, European J. Oper. Res., 290 (2021), 546-555. doi: 10.1016/j.ejor.2020.08.023.
[41]	W. Yu, H. Shang and R. Z. Han, The impact of carbon emissions tax on vertical centralized supply chain channel structure, Computers & Industrial Engineering, 141 (2020), 106303. doi: 10.1016/j.cie.2020.106303.
[42]	G. H. Zhang, Y. T. Li and Y. Ma, Direct selling, agent selling, or dual-format selling: Electronic channel configuration considering channel competition and platform service, Computers & Industrial Engineering, 157 (2021), 107368. doi: 10.1016/j.cie.2021.107368.
[43]	J. Zhang, T. Chen and Q. Chen, Manufacturer's optimal pricing decisions of differentiated reputation platforms under subsidy strategy, J. Industrial and Management Optimization, preprint, 2021.
[44]	R. R. Zhang, W. M. Ma, H. Y. Si, J. J. Liu and L. Liao, Cooperative game analysis of coordination mechanisms under fairness concerns of a green retailer, J. Retailing and Consumer Service, 59 (2021), 102361. doi: 10.1016/j.jretconser.2020.102361.
[45]	X. M. Zhang, Q. W. Li, Z. Liu and C. T. Chang, Optimal pricing and remanufacturing mode in a closed-loop supply chain of WEEE under government fund policy, Computers & Industrial Engineering, 151 (2021), 106951. doi: 10.1016/j.cie.2020.106951.
[46]	X. M. Zhang, C. H. Ma, H. R. Chen and G. H. Qi, Impact of retailer's vertical and horizontal fairness concerns on manufacturer's online channel mode, Discrete Dyn. Nat. Soc., 2021 (2021), 6692582, 12 pp. doi: 10.1155/2021/6692582.
[47]	X. M. Zhang, M. L. Song and G. D. Liu, Service product pricing strategies based on time-sensitive customer choice behavior, J. Ind. Manag. Optim., 13 (2017), 297-312. doi: 10.3934/jimo.2016018.
[48]	Y. M. Zhang and B. Hezarkhani, Competition in dual-channel supply chains: The manufacturers' channel selection, European J. Oper. Res., 291 (2021), 244-262. doi: 10.1016/j.ejor.2020.09.031.
[49]	Z. Zhang, H. M. Song, V. Shi and S. L. Yang, Quality differentiation in a dual-channel supply chain, European J. Oper. Res., 290 (2021), 1000-1013. doi: 10.1016/j.ejor.2020.09.003.
[50]	Y. F. Zhao, Y. Wang and G. Q. Shi, The impact of consumers' peer-induced fairness concerns on mixed retail and e-tail channels, Discrete Dyn. Nat. Soc., 2020 (2020), 9023470, 15 pp. doi: 10.1155/2020/9023470.
[51]	X. X. Zheng, Z. Liu, K. W. Li, J. Huang and J. Chen, Cooperative game approaches to coordinating a three-echelon closed-loop supply chain with fairness concerns, International J. Production Economics, 212 (2019), 92-110. doi: 10.1016/j.ijpe.2019.01.011.
[52]	Q. Zhou, Q. H. Li, X. Q. Hu, W. Yang and W. X. Chen, Optimal contract design problem considering the retailer's fairness concern with asymmetric demand information, J. Cleaner Production, 287 (2021), 125407. doi: 10.1016/j.jclepro.2020.125407.