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Supply chain equilibrium among companies with offline and online selling channels

Author

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  • Yugang Yu
  • Xiaoya Han
  • Jie Liu
  • Qin Cheng

Abstract

This study proposes a supply chain system model containing Nash game companies that compete in a common market. Each company adopts a vertical integration strategy and runs offline and online selling channels. To maximise profits, the companies determine optimal production quantities and prices. Using theory of finite-dimensional variational inequality, we prove the existence and uniqueness of the equilibrium pattern and develop a converged algorithm. Numerically, we compute the equilibrium production quantities and prices, and subsequently generate three findings through sensitivity analyses. By changing the transportation cost, we demonstrate that the offline price is conditionally higher than the online price with different transportation and processing costs. All equilibrium prices and profits decrease when substitution intensity is increased, and thus companies should differentiate their products. Altering consumer preference for online purchasing shows that consumer preference significantly influences the production quantities and profits. Online selling is not positively affected by consumer preference for online purchasing but is affected by the complex relationship between consumer preference and its variable cost.

Suggested Citation

  • Yugang Yu & Xiaoya Han & Jie Liu & Qin Cheng, 2015. "Supply chain equilibrium among companies with offline and online selling channels," International Journal of Production Research, Taylor & Francis Journals, vol. 53(22), pages 6672-6688, November.
    • Handle: RePEc:taf:tprsxx:v:53:y:2015:i:22:p:6672-6688
    DOI: 10.1080/00207543.2015.1055350
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    Cited by:

    1. Zhisong Chen & Li Fang & Shong-Iee Ivan Su, 2021. "The value of offline channel subsidy in bricks and clicks: an O2O supply chain coordination perspective," Electronic Commerce Research, Springer, vol. 21(2), pages 599-643, June.
    2. Xue Chen & Jun Li & Zhongbao Wang, 2023. "Equilibrium Decisions for Fresh Product Supply Chain Considering Consumers’ Freshness Preference," Networks and Spatial Economics, Springer, vol. 23(3), pages 771-797, September.
    3. Yu, Yugang & Han, Xiaoya & Hu, Guiping, 2016. "Optimal production for manufacturers considering consumer environmental awareness and green subsidies," International Journal of Production Economics, Elsevier, vol. 182(C), pages 397-408.
    4. Hongyan Dai & Peng Liu, 2020. "Workforce planning for O2O delivery systems with crowdsourced drivers," Annals of Operations Research, Springer, vol. 291(1), pages 219-245, August.
    5. Han, Xiaoya & Liu, Xin, 2020. "Equilibrium decisions for multi-firms considering consumer quality preference," International Journal of Production Economics, Elsevier, vol. 227(C).
    6. Zhang, Guangming & Dai, Gengxin & Sun, Hao & Zhang, Guitao & Yang, Zhilin, 2020. "Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).
    7. Chen Wei & Sobhan Asian & Gurdal Ertek & Zhi-Hua Hu, 2020. "Location-based pricing and channel selection in a supply chain: a case study from the food retail industry," Annals of Operations Research, Springer, vol. 291(1), pages 959-984, August.

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