Pricing decisions in a dual-channel supply chain with dominant manufacturer

Abstract

This paper investigates the dominance strategies exerted by the dominant manufacture for maintaining its dominant position in the channel system which is operating substitutable products and what influences they have on members of the whole channel system and the consumers. As to the channel system with two manufactures and one retailer, the pricing decisions are depicted to compare the optimal choice made by the system members under dominant manufactures' wholesale price dominance strategy and channel dominance strategy, respectively. It shows that only the dominant manufacturer can necessarily benefit from the wholesale price dominance strategy. Furthermore, both dominant manufacturer and retailer can benefit from the channel dominance strategy, and consumers can also benefit from it. The channel dominance strategy, however, is not always the optimal choice for the dominant manufacturer. Whatever dominance strategy is it, the weak manufacturer will suffer loss, but in channel dominance strategy, the market share of weak manufacturer will increase under certain circumstances.