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The impact of retailers’ alliance on manufacturer’s profit in a dual-channel structure

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  • Huihui Liu
  • Shuguang Sun
  • Ming Lei
  • Honghui Deng
  • G. Keong Leong

Abstract

When a manufacturer adds a direct sales channel to its existing retail channel, retailers may cooperate with one another to respond to this new competition. Our study develops a Cournot competition model in a dual-channel supply chain consisting of a manufacturer and multiple retailers. In a Stackelberg decision model, the manufacturer first sets the direct sales quantity and wholesale price, and then the retailers decide the order quantities. The results indicate that forming an alliance is not always beneficial for retailers. When direct sales cost is high, there is less likelihood for retailers to collaborate. On the other hand, retailers will form an alliance when direct sales cost is sufficiently low. This will likely reduce the manufacturer’s profit. As such decreasing direct sales cost is not necessarily beneficial for the manufacturer because of the retailers’ possible collaborative efforts. In addition, the study finds that when demand fluctuation increases or the manufacturer’s information accuracy decreases, it is more likely that retailers will form an alliance. After relaxing the assumption of homogeneous retailers, our numerical study validates the possibility of partial alliance. If some retailers’ marginal costs are sufficiently high, we could see the formation of a partial alliance.

Suggested Citation

  • Huihui Liu & Shuguang Sun & Ming Lei & Honghui Deng & G. Keong Leong, 2017. "The impact of retailers’ alliance on manufacturer’s profit in a dual-channel structure," International Journal of Production Research, Taylor & Francis Journals, vol. 55(22), pages 6592-6607, November.
  • Handle: RePEc:taf:tprsxx:v:55:y:2017:i:22:p:6592-6607
    DOI: 10.1080/00207543.2017.1330563
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    Cited by:

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    3. Zhou, Yu & Gao, Xiang & Luo, Suyuan & Xiong, Yu & Ye, Niangyue, 2022. "Anti-Counterfeiting in a retail Platform: A Game-Theoretic approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    4. Xiaole Dou & Zenglu Li & Chun Liu, 2022. "Secondhand product quality disclosure strategy of the retailer under different supply chain structures," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2982-2999, October.
    5. Zhang, Guangming & Dai, Gengxin & Sun, Hao & Zhang, Guitao & Yang, Zhilin, 2020. "Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).

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