Preferred Service Investment in the Dual-Channel Supply Chain: Leader-Follower Relationships and Product Characteristics

This paper examines the influence that members’ preferred service investments have on their decision-making and profits in a dual-channel supply chain. We discuss changes in the supplier’s and retailer’s decision-making and optimal profits with reference to their different preferred service investment combination modes and their different leader-follower relationships. We also provide classified comparisons of the supplier’s and retailer’s optimal profits by referring to four types of product characteristics combination modes that are assessed across two channels. By providing classifications and comparisons, we put forward operational insights for the supplier and retailer who have direct implications for their optimal decisions and profits, including selling products with higher homogeneity between two channels, choosing the retailer as the leader of the supply chain, and confirming appropriate preference combination mode under a certain product characteristics. We analyze the influences of the preferred service investment levels as well as preference intensities of the supplier and retailer on their strategies and profits in their respective advantaged states and obtain some enlightenment about the cooperation strategies and relationship-building methods of the supplier and retailer in the actual process of their participation in the dual-channel supply chain operation.