Game theoretical analysis of service effort timing scheme strategies in dual-channel supply chains

This study investigates a dual-channel supply chain that consists of a manufacturer and two retailers wherein the manufacturer produces and supplies a single product to the retailers. The manufacturer decides the wholesale prices while the retailers decide the retail prices and their service effort levels. Considering three different timing scheme strategies based on the timing of firms’ pricing and service effort decisions, we show that the wholesale price-led timing scheme strategy—where the manufacturer takes the wholesale pricing decisions before the retailers announce their service effort levels and prices—produces a Pareto zone, in which all parties in the supply chain including the manufacturer, retailers, and consumers are better off. Moreover, we numerically validate the robustness of this result when there exists an asymmetric cross-effect of the service effort where the service efforts made by one retailer could influence the demand of the other retailer in an asymmetrical way.