Decision analysis of retailer-dominated dual-channel supply chain considering cost misreporting

This study discusses a dual-channel supply chain, wherein the retailer is the leader of the Stackelberg game consisting of two manufacturers and one retailer. In this model, one of the manufacturers simultaneously sells a product through direct and retail channels, while the seller merely uses the retail channel. First, this study explains the optimal pricing problem of the supply chain, and analyzes the relationship among the optimal lied factors of the manufacturer, the cross-price sensitivity of the customer, and cost when maximizing manufacturer profit. Second, this study compares the impact on supply chain performance between the strategies where a manufacturer lies about the cost information and complete information and the other manufacturer only lies about cost information. Finally, results show that manufacturers raise their cost information when they have superior information. However, their misreporting behavior causes adversity between the retailer and the entire supply chain. And, the influence is related to cross-price sensitivity of a customer. Furthermore, although the misreporting behavior of manufactures benefits some participants of a supply chain, it is unfavorable for the whole supply chain.