Pricing and advertising in dual-channel supply chains: real applications for coffee processing and distribution companies

ABSTRACT

In the present research, the local and global dynamic advertising and competitive pricing are considered in the form of an integrated differential game model in the dual-channel supply chain of a coffee processing company. Furthermore, integrated mathematical analyses are presented to examine the equilibrium paths of the game. One of the main novelties of this study is to consider the state variable as the amount of credibility that is given to the customer by the global advertising of the manufacturer. According to the results, the equilibrium price of online sales is higher than the retail price. Furthermore, the advertisement volume of the manufacturer in the online channel is more than the local advertisement volume of the retailer, and the advertisement volume of the retailer is more than the global advertisement volume of the manufacturer. In this case, the profit of the manufacturer in the online channel is always more than the profit of the retailer in the traditional retail channel. Therefore, activities of the direct online channel can lead to an increase in profits, however, the conflict of channels could reduce the demands through the traditional retail channel. The sensitivity of equilibrium levels of optimal variables are also analyzed.

KEYWORDS:

• Pricing
• advertising
• dual-channel supply chain
• game theory
• dynamic games
• coffee industry

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Wolfram Mathematica 9.0.