Incentive provision for consumer deliberation in a supply chain with dual-purpose organizations

This study investigates firms’ incentive provision decisions for consumer deliberation in a dyadic supply chain wherein consumers face valuation uncertainty regarding a new product. In contrast to conventional models focusing solely on pure profit maximization, we consider a manufacturer and retailer who also value consumer surplus. Using a game-theoretical model, we analyze two scenarios: one where the manufacturer has a dual-purpose concern and another where the retailer does. The strategic interaction between the firm’s concern for consumer surplus and consumers’ deliberation behavior yields nontrivial implications for equilibrium strategies and channel performance. First, the firm’s dual-purpose concern fundamentally alters the manufacturer’s incentive provision strategies. Specifically, the manufacturer’s incentive to inhibit consumer deliberation increases with the firm’s degree of concern for consumer surplus, with this effect amplified in the case of the dual-purpose retailer. Second, counter to the intuition that a dual-purpose retailer would be worse off by deviating from pure profit maximization, we find that in certain scenarios, the retailer’s dual-purpose orientation can yield a “win-win” situation for both firms. However, this outcome does not occur when the manufacturer adopts a dual-purpose focus. Third, both the deliberation cost and degree of concern regarding consumer surplus exhibit non-monotonic effects on the firms’ profits. Notably, consumer surplus and social welfare with a dual-purpose retailer are superior, or at least equivalent, to those with a dual-purpose manufacturer. Finally, the main results remain qualitatively valid when both firms are concerned about consumer surplus or when either firm places excessive focus on the same.