MANUFACTURER'S DECISIONS ABOUT ESTABLISHING ONLINE SELLING CHANNEL UNDER A TWO-ECHELON SUPPLY CHAIN: A GAME-THEORETIC APPROACH

This paper establishes a supply chain under two different structures. In the first structure, one manufacturer produces a product and sells it to customers online through the e-tail channel by an e-tailer as well as traditionally through the retail channel by multiple retailers. In this setting, the manufacturer assigns responsibility of the e-tail channel to the e-tailer. In the second structure, the manufacturer establishes the e-tail channel by paying a setup cost and sells products online himself and via the retail channel by multiple retailers. First, game theory is applied to make decisions under various competitive-cooperative interactions among the members. Then, under different situations, it is investigated which structure is more beneficial from the manufacturer's view. Finally, decisions are compared and a sensitivity analysis is performed to investigate the effects of parametric changes on decisions. The results indicate that it is preferable for the manufacturer to open the online channel himself, if the setup cost of this channel is less than a threshold. From the whole system's perspective, it is beneficial to assign the responsibility of the e-tail channel to an e-tailer. Furthermore, the larger the number of the retailers in the retail channel, the lower profits for all members.