A DUAL-CHANNEL SUPPLY CHAIN MODEL UNDER PRICE AND WARRANTY COMPETITION

Many industries use dual distribution channels to offer and distribute products, including electronics, appliances and apparel. This research develops a dual-channel supply chain including a manufacturer direct channel and a retail channel. If customers incur higher price or lower warranty length, they will shift to another channel, i.e., the substitute effect. In the retail channel, the manufacturer determines the optimal wholesale price and the warranty length, whereas the retailer determines the optimal retail price. In the direct channel, the manufacturer determines the optimal price and warranty length to provide to end customers. The current study adopts a non-cooperative and cooperative equilibrium to solve the problem described above and discusses how to use profit sharing mechanisms to achieve a positive situation in the cooperative game. The study concludes with a computational analysis that leads to various managerial insights. These results should be a useful reference for managerial decision-making.