Price decisions with asymmetric reference effect and information sharing in dual-channel supply chains

Abstract

This paper considers a retailer-manufacturer dual-channel supply chain (DCSC) consisting of a retail channel and a direct sale channel. Previous literature has shown that either asymmetric reference effect (ARE) or information sharing (IS) significantly impacts customers' demand, then the channel members' pricing decisions. As yet, no literature has examined the joint effect of both on the channel members' pricing decisions, especially in a DCSC. To fill up the deficiency, we first explore and compare the pricing decisions in a centralized and a decentralized DCSC with ARE, respectively, with and without IS, using the Stackelberg game and two-stage optimization technique. Then we evaluate the values of ARE and IS by introducing model misspecification and numerical experiments. We find that substantial revenue will be lost if the retailer ignores ARE when information is shared than not shared, especially when the channel members are pessimistic about the market. A higher reference price or a weaker ARE induces the channel members to increase prices, and make IS more valuable to them. Besides, whether the information is shared or not, channel members generally underestimate revenues under a relatively high reference price, while overestimating the revenues under a relatively small reference price. Furthermore, the manufacturer conditionally accepts the IS while the retailer always accepts it.

The impact of reference price effect on pricing decisions

“…The results have shown that the impact of retail services on the pricing decisions of supply chain members is more pronounced. Zhao et al (2022) discussed the impact of asymmetric reference effect (ARE) on dual-channel supply chain decision making and found that ARE affects channel members differently when information is shared versus not shared. Wu et al (2023) investigated the effects of information sharing on optimal advertising expenditures, pricing mechanisms, manufacturer, and retailer performance, and found that manufacturers benefit from information sharing, while retailers benefit from the smaller market shares held by the retail channel.…”

“…The results have shown that the impact of retail services on the pricing decisions of supply chain members is more pronounced. Zhao et al. (2022) discussed the impact of asymmetric reference effect (ARE) on dual-channel supply chain decision making and found that ARE affects channel members differently when information is shared versus not shared.…”

Markdown pricing strategy under a dual-channel supply chain with strategic consumers

“…Our work is also related to the literature on a two-period dual-channel supply chain. Dual-channel supply chain with a single-period has been widely studied in the past few decades (e.g., [2,12,21,22,48]). In a recent, a multi-period dualchannel have been paid attention to some researchers.…”

Effects of consumer loyalty and product web compatibility on cooperative advertising and pricing policies in a dual-channel supply chain

“…Cattani et al [11] investigate the effects on profits and market share when the direct channel is introduced under specific pricing strategies. More recent research has investigated various topics, including channel coordination and contracts [8,9], pricing, service, and quality effort decisions [15], pricing decisions in the presence of multiple retailers [23], pricing and asymmetric reference effect [47], pricing and inventory decisions [21], pricing, quality, and stocking decisions [20], and the effect of information structure and risk aversion [33]. In the context of multi-channel distribution systems, Tahirov and Glock [41] carry out an exhaustive review of the manufacturer's drivers behind opening a direct channel and possible mechanisms to mitigate the channel conflicts.…”