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doi: 10.3934/jimo.2022148
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Dual-channel supply chain coordination strategies considering electricity quality

 1 College of Management Science, Chengdu University of Technology, Chengdu, 610059, China 2 Sichuan Mineral Resources Research Center, Chengdu, 610059, China 3 School of Logistics, Yunnan University of Finance and Economics, Kunming, 650221, China 4 School of Marketing and Logistics Management, Nanjing University of Finance and Economics, Nanjing, 210023, China 5 School of Economics and Management, Southwest University of Science and Technology, Mianyang, 621010, China 6 School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, 611731, China

*Corresponding author: Jianchang Fan

Received  December 2021 Revised  June 2022 Early access August 2022

The introduction of tradable electricity platforms in China has enriched the channels for consumers to purchase electricity and intensified the competition among channels. The quality of electricity is an essential factor affecting consumer purchasing behavior. This paper mainly focuses on the influence of the competition among channels on electricity quality.We construct a dual-channel electricity supply chain, in which electricity generators sell electricity directly to consumers or resell it through electricity retailers. We use the backward induction method of game theory to solve the equilibrium solutions in centralized, decentralized, and coordinated decisions. By analyzing and comparing the equilibrium solutions, we draw the following conclusions; (1) Electricity quality, electricity price, electricity demand, and profits increase with the sensitivity coefficient of electricity quality and price competition coefficient. (2) Electricity quality, electricity price, electricity demand, and profits decrease with the investment cost coefficient of quality improvement. (3) The increase in transmission and distribution costs reduces the electricity quality while increasing the electricity price through both channels. Furthermore, the increase leads to an increase in electricity demand and the profit of the electricity retailer through the resale channel. However, it reduces the electricity demand and the profit of the electricity generator through the direct sales channel. (4) A combined contract consisting of revenue sharing and quality improvement investment cost-sharing can lead to coordination.

Citation: Wei Chen, Kaiming Zheng, Mengwen Li, Jianchang Fan, Nana Wan, Matthew Quayson. Dual-channel supply chain coordination strategies considering electricity quality. Journal of Industrial and Management Optimization, doi: 10.3934/jimo.2022148
References:
 [1] A. Aslani and J. Heydari, Transshipment contract for coordination of a green dual-channel supply chain under channel disruption, Journal of Cleaner Production, 223 (2019), 596-609.  doi: 10.1016/j.jclepro.2019.03.186. [2] E. Cao, Y. Ma, C. Wan and M. Lai, Contracting with asymmetric cost information in a dual-channel supply chain, Operations Research Letters, 41 (2013), 410-414.  doi: 10.1016/j.orl.2013.04.013. [3] J. Chen, L. Liang, D.-Q. Yao and S. Sun, Price and quality decisions in dual-channel supply chains, European Journal of Operational Research, 259 (2017), 935-948.  doi: 10.1016/j.ejor.2016.11.016. [4] J. Chen, W. Zhang and Z. Liu, Joint pricing, services and quality decisions in a dual-channel supply chain, RAIRO-Operations Research, 54 (2020), 1041-1056.  doi: 10.1051/ro/2019024. [5] W. Chen, J. Chen and Y. Ma, Renewable energy investment and carbon emissions under cap-and-trade mechanisms, Journal of Cleaner Production, 278 (2021), 123341.  doi: 10.1016/j.jclepro.2020.123341. [6] W. Chen, L. Zhang and H. Du, Impact of cap-and-trade mechanisms on investments in renewable energy and marketing effort, Sustainable Production and Consumption, 28 (2021), 1333-1342. [7] B. Dan, G. Xu and C. Liu, Pricing policies in a dual-channel supply chain with retail services, International Journal of Production Economics, 139 (2012), 312-320.  doi: 10.1016/j.ijpe.2012.05.014. [8] A. Dumrongsiri, M. Fan, A. Jain and K. Moinzadeh, A supply chain model with direct and retail channels, European Journal of Operational Research, 187 (2008), 691-718.  doi: 10.1016/j.ejor.2006.05.044. [9] L. Feng, K. Govindan and C. Li, Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior, European Journal of Operational Research, 260 (2017), 601-612.  doi: 10.1016/j.ejor.2016.12.050. [10] B. C. Giri and B. Roy, Dual-channel competition: The impact of pricing strategies, sales effort and market share, International Journal of Management Science and Engineering Management, 11 (2016), 203-212.  doi: 10.1080/17509653.2015.1055342. [11] N. Jabarzare and M. Rasti-Barzoki, A game theoretic approach for pricing and determining quality level through coordination contracts in a dual-channel supply chain including manufacturer and packaging company, International Journal of Production Economics, 221 (2020), 107480.  doi: 10.1016/j.ijpe.2019.09.001. [12] J. Ji, Z. Zhang and L. Yang, Comparisons of initial carbon allowance allocation rules in an o2o retail supply chain with the cap-and-trade regulation, International Journal of Production Economics, 187 (2017), 68-84.  doi: 10.1016/j.ijpe.2017.02.011. [13] B. Jiang, C. Narasimhan and Ö Turut, Anticipated regret and product innovation, Management Science, 63 (2017), 4308-4323. [14] B. Li, P.-W. Hou, P. Chen and Q.-H. Li, Pricing strategy and coordination in a dual channel supply chain with a risk-averse retailer, International Journal of Production Economics, 178 (2016), 154-168. [15] M. Liu, K. Liang, S. Perera, R. Huang and S. Ghose, Game theoretical analysis of service effort timing scheme strategies in dual-channel supply chains, Transportation Research Part E: Logistics and Transportation Review, 158 (2022), 102620.  doi: 10.1016/j.tre.2022.102620. [16] R. Lotfi, B. Kargar, A. Gharehbaghi and G.-W. Weber, Viable medical waste chain network design by considering risk and robustness, Environmental Science and Pollution Research, (2021), 1-16. doi: 10.1007/s11356-021-16727-9. [17] R. Lotfi, B. Kargar, S. H. Hoseini, S. Nazari, S. Safavi and G.-W. Weber, Resilience and sustainable supply chain network design by considering renewable energy, International Journal of Energy Research, 45 (2021), 17749-17766.  doi: 10.1002/er.6943. [18] R. Lotfi, S. Safavi, A. Gharehbaghi, S. G. Zare, R. Hazrati and G.-W. Weber, Viable supply chain network design by considering blockchain technology and cryptocurrency, Mathematical Problems in Engineering, 2021 (2021). doi: 10.1155/2021/7347389. [19] R. Lotfi, Z. Sheikhi, M. Amra, M. AliBakhshi and G.-W. Weber, Robust optimization of risk-aware, resilient and sustainable closed-loop supply chain network design with lagrange relaxation and fix-and-optimize, International Journal of Logistics Research and Applications, (2021), 1-41. doi: 10.1080/13675567.2021.2017418. [20] P. Ma, H. Wang and J. Shang, Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts, International Journal of Production Economics, 146 (2013), 745-755.  doi: 10.1016/j.ijpe.2013.09.004. [21] A. Örsdemir, E. Kemahlıoğlu-Ziya and A. K. Parlaktürk, Competitive quality choice and remanufacturing, Production and Operations Management, 23 (2014), 48-64. [22] A. Ranjan and J. K. Jha, Pricing and coordination strategies of a dual-channel supply chain considering green quality and sales effort, Journal of Cleaner Production, 218 (2019), 409-424.  doi: 10.1016/j.jclepro.2019.01.297. [23] A. A. Tsay and N. Agrawal, Channel dynamics under price and service competition, Manufacturing & Service Operations Management, 2 (2000), 372-391.  doi: 10.1287/msom.2.4.372.12342. [24] S. Wang, Q. Hu and W. Liu, Price and quality-based competition and channel structure with consumer loyalty, European Journal of Operational Research, 262 (2017), 563-574.  doi: 10.1016/j.ejor.2017.03.052. [25] L. Xu, C. Wang and J. Zhao, Decision and coordination in the dual-channel supply chain considering cap-and-trade regulation, Journal of Cleaner Production, 197 (2018), 551-561.  doi: 10.1016/j.jclepro.2018.06.209. [26] D.-Q. Yao and J. J. Liu, Competitive pricing of mixed retail and e-tail distribution channels, Omega, 33 (2005), 235-247.  doi: 10.1016/j.omega.2004.04.007. [27] Z. Zhang, S. Liu and B. Niu, Coordination mechanism of dual-channel closed-loop supply chains considering product quality and return, Journal of Cleaner Production, 248 (2020), 119273.  doi: 10.1016/j.jclepro.2019.119273. [28] Z. Zhang, H. Song, V. Shi and S. Yang, Quality differentiation in a dual-channel supply chain, European Journal of Operational Research, 290 (2021), 1000-1013.  doi: 10.1016/j.ejor.2020.09.003. [29] C. Zhao and J. Song, Coordination of dual-channel supply chain considering differential pricing and loss-aversion based on quality control, Journal of Industrial and Management Optimization, (2022). doi: 10.3934/jimo.2022053.

show all references

References:
 [1] A. Aslani and J. Heydari, Transshipment contract for coordination of a green dual-channel supply chain under channel disruption, Journal of Cleaner Production, 223 (2019), 596-609.  doi: 10.1016/j.jclepro.2019.03.186. [2] E. Cao, Y. Ma, C. Wan and M. Lai, Contracting with asymmetric cost information in a dual-channel supply chain, Operations Research Letters, 41 (2013), 410-414.  doi: 10.1016/j.orl.2013.04.013. [3] J. Chen, L. Liang, D.-Q. Yao and S. Sun, Price and quality decisions in dual-channel supply chains, European Journal of Operational Research, 259 (2017), 935-948.  doi: 10.1016/j.ejor.2016.11.016. [4] J. Chen, W. Zhang and Z. Liu, Joint pricing, services and quality decisions in a dual-channel supply chain, RAIRO-Operations Research, 54 (2020), 1041-1056.  doi: 10.1051/ro/2019024. [5] W. Chen, J. Chen and Y. Ma, Renewable energy investment and carbon emissions under cap-and-trade mechanisms, Journal of Cleaner Production, 278 (2021), 123341.  doi: 10.1016/j.jclepro.2020.123341. [6] W. Chen, L. Zhang and H. Du, Impact of cap-and-trade mechanisms on investments in renewable energy and marketing effort, Sustainable Production and Consumption, 28 (2021), 1333-1342. [7] B. Dan, G. Xu and C. Liu, Pricing policies in a dual-channel supply chain with retail services, International Journal of Production Economics, 139 (2012), 312-320.  doi: 10.1016/j.ijpe.2012.05.014. [8] A. Dumrongsiri, M. Fan, A. Jain and K. Moinzadeh, A supply chain model with direct and retail channels, European Journal of Operational Research, 187 (2008), 691-718.  doi: 10.1016/j.ejor.2006.05.044. [9] L. Feng, K. Govindan and C. Li, Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior, European Journal of Operational Research, 260 (2017), 601-612.  doi: 10.1016/j.ejor.2016.12.050. [10] B. C. Giri and B. Roy, Dual-channel competition: The impact of pricing strategies, sales effort and market share, International Journal of Management Science and Engineering Management, 11 (2016), 203-212.  doi: 10.1080/17509653.2015.1055342. [11] N. Jabarzare and M. Rasti-Barzoki, A game theoretic approach for pricing and determining quality level through coordination contracts in a dual-channel supply chain including manufacturer and packaging company, International Journal of Production Economics, 221 (2020), 107480.  doi: 10.1016/j.ijpe.2019.09.001. [12] J. Ji, Z. Zhang and L. Yang, Comparisons of initial carbon allowance allocation rules in an o2o retail supply chain with the cap-and-trade regulation, International Journal of Production Economics, 187 (2017), 68-84.  doi: 10.1016/j.ijpe.2017.02.011. [13] B. Jiang, C. Narasimhan and Ö Turut, Anticipated regret and product innovation, Management Science, 63 (2017), 4308-4323. [14] B. Li, P.-W. Hou, P. Chen and Q.-H. Li, Pricing strategy and coordination in a dual channel supply chain with a risk-averse retailer, International Journal of Production Economics, 178 (2016), 154-168. [15] M. Liu, K. Liang, S. Perera, R. Huang and S. Ghose, Game theoretical analysis of service effort timing scheme strategies in dual-channel supply chains, Transportation Research Part E: Logistics and Transportation Review, 158 (2022), 102620.  doi: 10.1016/j.tre.2022.102620. [16] R. Lotfi, B. Kargar, A. Gharehbaghi and G.-W. Weber, Viable medical waste chain network design by considering risk and robustness, Environmental Science and Pollution Research, (2021), 1-16. doi: 10.1007/s11356-021-16727-9. [17] R. Lotfi, B. Kargar, S. H. Hoseini, S. Nazari, S. Safavi and G.-W. Weber, Resilience and sustainable supply chain network design by considering renewable energy, International Journal of Energy Research, 45 (2021), 17749-17766.  doi: 10.1002/er.6943. [18] R. Lotfi, S. Safavi, A. Gharehbaghi, S. G. Zare, R. Hazrati and G.-W. Weber, Viable supply chain network design by considering blockchain technology and cryptocurrency, Mathematical Problems in Engineering, 2021 (2021). doi: 10.1155/2021/7347389. [19] R. Lotfi, Z. Sheikhi, M. Amra, M. AliBakhshi and G.-W. Weber, Robust optimization of risk-aware, resilient and sustainable closed-loop supply chain network design with lagrange relaxation and fix-and-optimize, International Journal of Logistics Research and Applications, (2021), 1-41. doi: 10.1080/13675567.2021.2017418. [20] P. Ma, H. Wang and J. Shang, Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts, International Journal of Production Economics, 146 (2013), 745-755.  doi: 10.1016/j.ijpe.2013.09.004. [21] A. Örsdemir, E. Kemahlıoğlu-Ziya and A. K. Parlaktürk, Competitive quality choice and remanufacturing, Production and Operations Management, 23 (2014), 48-64. [22] A. Ranjan and J. K. Jha, Pricing and coordination strategies of a dual-channel supply chain considering green quality and sales effort, Journal of Cleaner Production, 218 (2019), 409-424.  doi: 10.1016/j.jclepro.2019.01.297. [23] A. A. Tsay and N. Agrawal, Channel dynamics under price and service competition, Manufacturing & Service Operations Management, 2 (2000), 372-391.  doi: 10.1287/msom.2.4.372.12342. [24] S. Wang, Q. Hu and W. Liu, Price and quality-based competition and channel structure with consumer loyalty, European Journal of Operational Research, 262 (2017), 563-574.  doi: 10.1016/j.ejor.2017.03.052. [25] L. Xu, C. Wang and J. Zhao, Decision and coordination in the dual-channel supply chain considering cap-and-trade regulation, Journal of Cleaner Production, 197 (2018), 551-561.  doi: 10.1016/j.jclepro.2018.06.209. [26] D.-Q. Yao and J. J. Liu, Competitive pricing of mixed retail and e-tail distribution channels, Omega, 33 (2005), 235-247.  doi: 10.1016/j.omega.2004.04.007. [27] Z. Zhang, S. Liu and B. Niu, Coordination mechanism of dual-channel closed-loop supply chains considering product quality and return, Journal of Cleaner Production, 248 (2020), 119273.  doi: 10.1016/j.jclepro.2019.119273. [28] Z. Zhang, H. Song, V. Shi and S. Yang, Quality differentiation in a dual-channel supply chain, European Journal of Operational Research, 290 (2021), 1000-1013.  doi: 10.1016/j.ejor.2020.09.003. [29] C. Zhao and J. Song, Coordination of dual-channel supply chain considering differential pricing and loss-aversion based on quality control, Journal of Industrial and Management Optimization, (2022). doi: 10.3934/jimo.2022053.
Decentralized decision
Centralized decision
The impact of competition degree $b$ on price
The impact of competition degree on demand
The impact of competition on electricity quality
The impact of competition degree $b$ on profits
The impact of distribution cost $r$ on profits
The impact of quality improvement cost e on profits
A summary of relevant studies
 Paper Quality Pricing Coordination Channel competition Manufacturer's investment quality Electricity supply chain Chen et al. (2020)[4] √ √ √ Zhang et al. (2021)[28] √ √ √ √ Liu et al., (2022)[15] √ √ √ Ranjan and Jha (2019)[22] √ √ √ √ Jabarzare and RastiBarzoki (2020)[11] √ √ √ √ Zhang et al. (2020)[27] √ √ √ √ √ Zhao et al., (2022)[29] √ √ √ √ √ This paper √ √ √ √ √ √
 Paper Quality Pricing Coordination Channel competition Manufacturer's investment quality Electricity supply chain Chen et al. (2020)[4] √ √ √ Zhang et al. (2021)[28] √ √ √ √ Liu et al., (2022)[15] √ √ √ Ranjan and Jha (2019)[22] √ √ √ √ Jabarzare and RastiBarzoki (2020)[11] √ √ √ √ Zhang et al. (2020)[27] √ √ √ √ √ Zhao et al., (2022)[29] √ √ √ √ √ This paper √ √ √ √ √ √
Notation
 Notation Description $a$ Potential electricity demand $b$ Degree of price competition between the two channels $c$ Consumer sensitivity to the quality of electricity $e$ Electricity quality improvement investment cost $\beta$ Electricity generation cost $r$ Transmission and distribution costs $d_r$ Resale electricity demand $d_m$ Direct electricity demand $\pi_r$ Profits of electricity retailers $\pi_m$ Profits of electricity generators Decision variables Description $q$ Electricity quality $p_r$ Electricity sales price set by the electricity retailer $p_m$ Electricity direct price set by the electricity generator
 Notation Description $a$ Potential electricity demand $b$ Degree of price competition between the two channels $c$ Consumer sensitivity to the quality of electricity $e$ Electricity quality improvement investment cost $\beta$ Electricity generation cost $r$ Transmission and distribution costs $d_r$ Resale electricity demand $d_m$ Direct electricity demand $\pi_r$ Profits of electricity retailers $\pi_m$ Profits of electricity generators Decision variables Description $q$ Electricity quality $p_r$ Electricity sales price set by the electricity retailer $p_m$ Electricity direct price set by the electricity generator
A summary of conclusions
 Decentralized decision Centralized decision Electricity price Depend on the costs of transmission and distribution. Electricity quality √ Electricity demand √ Electricity supply chain profit √
 Decentralized decision Centralized decision Electricity price Depend on the costs of transmission and distribution. Electricity quality √ Electricity demand √ Electricity supply chain profit √
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