Retailer Pricing and Channel Selection Strategies Considering Free-riding and Risk Aversion

doi:10.3969/j.issn.1007-7375.2020.06.002

Abstract

Abstract: Aiming at a supply chain consisting of a risk-averse retailer and a risk-neutral manufacturer, considering the "free-riding" behavior of consumer services, a retail-led mean-variance model under single-channel and dual-channel retailers is constructed. Through the inverse solution, the optimal decisions of the supply chain members are obtained and compared. Finally, the analysis and verification of an example show that the retailer's dual-channel price is inversely related to the retailer's risk attitude and market demand fluctuations, while the manufacturer's wholesale price changes are opposite. When the retailer's risk aversion is within a certain range, expected utility is higher than that under decentralized decision-making. It is not always advantageous for retailers to open online channels under "free-riding", and there are free-riding ratios, promotional effort coefficients, and risk aversion value ranges that make retail profitable. On the contrary, it will cause negative growth in profit when it is outside the optimal range. Therefore, companies should reasonably control their degree of risk aversion and cost coefficient to obtain excess profits under the dual channel model more properly.

Key words: risk aversion, mean-variance, dual-channel supply chain

CLC Number:

F274

ZHANG Guangming, JIANG Hao, TAO Ying. Retailer Pricing and Channel Selection Strategies Considering Free-riding and Risk Aversion[J]. Industrial Engineering Journal, 2020, 23(6): 10-17.

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