Abstract: Based on the consumer utility theory, the influences of product online-compatibility characteristic and retailer's innovation investment on the pricing and profits of supply chain members and whole supply chain profit are discussed under Bertrand and Stackelberg game between a manufacturer and a retailer. The research shows that by the manufacturer's opening a dual channel the market demand is expanded. But the profits of the retailer and the whole supply chain are decreased. So the manufacturer confronts with the difficulty of maintenance when he wants to open a dual channel. By setting an appropriate wholesale price of the manufacturer, the whole supply chain profit can be improved. It also shows that in Bertrand game when the manufacturer sets the appropriate wholesale price and prompts the retailer in the optimal innovation investment of whole supply chain, the profits of whole supply chain will be further improved. Finally the cooperation strategy of the manufacturer is proposed. All these will be helpful for the manufacturer to conduct a dual channel and choose the cooperation mode and strategy considering product online-compatibility.

Key words: supply chain, product online-compatibility, game, dual channel, innovation investment