. . . . . .

Abstract

Following the development of Internet, many manufacturers have complemented

their existing retail channels with an online channel, which allows them to sell
directly to their consumers. In our research, the important roles are retail service and
consumer loyal to the brand we consider in the paper and the store selling the product
of the focus brand. That is, consumers in our model are one of two typesstore loyal
or brand loyal. The main objective of this study is to examine the factors that may
affect the manufacturers decision to complement the retail channel with a direct
online channel. Especially, we want to examine the change of retail service after
manufacturers complement their existing retail channels with an online channel. No
matter the situation is in the absence of online channel, or in the presence of online
channel, the retail service is influenced by the retail price and the wholesale price in
the traditional channel. The larger the retail price is, the higher the retail service will
be. But the relationship between the retail service and the wholesale is negative. Of
course, in the case with an online channel, the retail price in the traditional channel is
affected by the retail price in the online channel and the wholesale price, the retail
price in the online channel is also affected by the wholesale price. And the effect of
the change in the wholesale price on the retail price in the traditional channel is bigger
than that on the retail price in the online channel. Therefore, after manufacturers
complement their existing retail channels with an online channel, what is the change
about the wholesale price, up or down? What is the effect of the outcome on the retail
price in the traditional channel and in the online channel, and the effect on the retail
service. We are interested in answering these questions in this research.

Keywords. Dual distribution . Store loyal . Brand loyal. Retail support . .

Game-theory

(double marginalization)

Balasubramanian (1998)

Chun and Kim (2005)

Huang and

Swaminathan(2009) Khoujaetal.(2010)

Kurata et al. (2007)

Takahashi et al (2011)

Cai

etal.(2009)

w T

p rT s

s T

p e

w TE p rTE


r e

1
( p rTE p e )]
2d

 1.

()

(brand loyal)

(store loyal)( Kumar and Ruan, 2006)

()

Hotelling(1950)

0 0

3 3

-1/2 -d 0 d 1/2

2.

i. (0

)( 0.5)

[-d,0]

| p rTE p e | d

p e

p rTE

1
e [0.5 ( p rTE p e )]
2d

 1
e [0.5 ( p e p rTE )]
2d

[-1/2,-d]

1
e [0.5 ( p rTE p e )]
2d

1
e [0.5 ( p e p rTE )]
2d

ii. (0 )

0.5) (0 )(0 d)

1
e [0.5 ( p e p rTE )]
2d

[d,1/2]

1
e [0.5 ( p e p rTE )]
2d

0 x

0 x 1

3.

U v tx Pr s

() x

x t ( x 0) Pr

Pr p rT

Pr p rTE s

U v tx Pr s 0

1
x (v Pr s ) (1)
t

1.

()

Ds 0 Dr s r x

2.

1
De e [0.5 ( p e p rTE )]
2d
1
Dr e [0.5 ( p e p rTE )] r x
2d

p e

p rTE

1.

mT wT ( e r x) (2)

m T

w T c

mT

 rT ( p rT wT )( e r x) C ( s) (3)

r p rT

C ( s) s 2 / 2 rT

()

2.

mTE e [0.5 ( pe p rTE )] pe { e [0.5 ( pe p rTE )] r x}wTE (4)

TE

w TE

ce

1
rTE { e [0.5 ( pe p rTE )] r x}( p rTE wTE ) C ( s ) (5)
2d

i.

ii.
iii.

i.

ii.

iii.

iv.

(3)s

r T
s ( Pr wT ) (6)
t

(6)

(6) e PrT

w T
 (1)(6)

ds r
(8)
T
dp r t
dx 2 r t
(9)
dprT t 2

(3) p rT (8)(9)

1
p rT [t r v t 2 e r (t 2 r )wT ] (10)
(2t r r )
2 2

1 1

(t 2 r ) 0

(10)

dp rT t r 2 r2
0
dwT (2t r 2 r2 ) 2

dp rT t r
0
dv (2t r 2 r2 ) 2
dp rT t 2
0
d e (2t r 2 r2 ) 2

dp rT t 2 r2 [ r wT ( r v e )]

d (2t r 2 r2 ) 2

dp rT 2 r2 [t r v t 2 e (t r 2 r2 1) wT ]
0
d (2t r 2 r2 ) 2

(2)

1
wT (t e r v 2 r e ) (11)
2 r

dwT t 2 r
0
d e (2 r ) 2
dwT t e
0
d r 2 r2
dwT r
0
dv 2t r
dwT e
0
d 2

v r e 1 2 r e

1
wT (t e r v ) (12)
2 r

(12)(10)

(3t 2 r )(v r t e )
p rT
2 r (2t 2 r )

2 r2 0

3(v r t e )
prT
4 r (13)

dp rT 3
0
d e 4 r

dp rT 3t e
0
d r 4 r

(12)(13)(6)

(v r t e )
s
2(2t 2 r ) (14)

1.

2.

3.

4.

5.

(1)

r v 3t e
x (15)
4t r

t 2 r 0 3t 2 2 r 0

3t e
v
r

0(15)
 dx 1
0
dv 4t

dx 3
0
d e 4 r

dx 3t r
0
d r 4 r

dx 3 v
r 0
dt 4 r

r v t e
e r x
4t

(12)

( r v t e ) 2
T

8t r
m

e r x (12) (13)(14)(3)

( r v t e ) 2 [( 2t 2 r ) 2 2t 2 r ]
T

16t r (2t 2 r ) 2
r


(5)s

r TE
s ( Pr wTE )
t

(6)

(5) PrTE

2 r v t e t e 1
p rTE pe wTE (16)
4(t e r ) 2(t e r ) 2

dp rTE 1 t e dpe 1

dw TE
2 2(t e r ) dw TE
2

dpe / dwTE 0 1/2

dp rTE t e 1

dpe 2(t e r ) 2

(4)

p e

3t e 2(v 1) r t e r TE
pe w (17)
4(t e 2 r ) t e 2 r

(16)(17)
 2 r v t e 2 r
p rTE p e
8(t e r )

t e 2 r
v (18)
2 r

p rTE p e

p rTE p e

(18)

d ( p rTE pe ) 2 r
0
dv 8(t e r )

d ( p rTE pe ) t (2 r v r )
0
d e 8(t e r ) 2

(18) e

d ( p rTE pe ) t e (2v 1)
0
d r 8(t e r ) 2

(18) r

 (4)

w TE

2 r v 3t e 2 r
wTE (19)
2(t e r )

dwTE r
0
dv t e r

dwTE t ( e 2 r v)

d e 2(t e r ) 2

(18)

dwTE t e (2v 1)
0
d r 2(t e r ) 2

(4)(5)

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