A Game Theory Analysis of Competitive Strategies of Durable Goods Manufacturer and Dealer under the Electronic Commerce Environment

 A two-period dual channel model is considered in which a manufacturer sells a durable product directly through both a manufacturer-owned e-channel and an independent dealer who sells products directly to consumers. By solving the Kuhn-Tucker conditions of the optimization problem of each period, each supply chain player’s optimal decisions and profits are obtained. The results show that the product durability and direct selling cost have an important impact on player’s optimal strategies in a dual channel supply chain. When the direct selling cost exceeds a certain threshold, it is optimal for the manufacturer to open an e-channel even when there are no products sales through it. Moreover, the dealer may benefit from the manufacturer’s encroachment when the direct selling cost is higher.