An Equilibrium Model of Online Shopping Supply Chain Networks with Service Capacity Investment

In this paper we propose an online shopping supply chain network model that includes manufacturers, e-tailers, express service providers, and consumers. Consumers purchase products from e-tailers that can be either delivered by the express service companies or picked up by the customers themselves at certain physical locations, depending on the consumers' preferences on time and cost. In addition, the express service companies can make investments to improve their service quality. We identify the network structure of the problem, derive the equilibrium conditions, and establish the finite-dimensional variational inequality formulation. Theoretical results and numerical examples are presented to provide some managerial insights of the model.