Experience-Centric Service Cooperation Strategies and Pricing Strategies in a Dual-Channel Supply Chain

Abstract

With the rapid development of e-commerce, more and more manufacturers in dual-channel supply chains choose to cooperate with the retailer, who becomes responsible for providing experience service to customers. In our research, we use a Stackelberg game theoretic model to analyze the free- riding scenario and the service cooperation mechanism implemented by the manufacturer and the retailer to increase both of their profits. The retailer is responsible for providing service, and the manufacturer shares a part of that service cost. We provide the optimal pricing decisions and optimal service level, and we analyze the members' profit from service cooperation. Degree ratios for the service cooperation and the free-riding behaviors between two members are presented. We find that the manufacturer benefits much more and the profit of the retailer will be hurt as the degree ratio of free riding increases. However, when the degree ratio of service cooperation increases, the profits of both members will increase.