The Newsboy Problem with Online Dual Channels

Abstract

We consider a supply chain with one manufacture, who sells his products through online dual channels. One selling channel is the traditional brick-and-mortar retail store while the other is an e-channel in which customer places order through Internet. When the manufacturer operates both channels, we aim to see the optimal production and pricing strategies under the centralized control. It is shown that the optimal selling price in traditional channel is always higher than that in E-channel, and both of optimal selling prices in two channels are decreasing function on demand-price elasticity, selling cost in own channel, respectively. Further, there are two ways to improve the system performance, one is to reduce the selling cost and the other is set the optimal selling prices according to the demand-price elasticity. By the comparison between the joint decisions of single channel and online dual channels, we can find that the system performance of online dual channel, which include an online channel with lower selling cost, is always better than that of single channel system.