Traditional Retailer Channel Or Dual-Channel Under Manufacture’s Scale Diseconomies

With rapid development of commence on the internet, it is more possible that manufactures who traditionally distribute their products through the retailer partners engages their own direct channel to satisfy end customers. The phenomenon the direct channel and the traditional retailer channel rise at the same time (the dual-channel) has happened. Even though there is a number of research about dual-channel, traditional wisdoms just focus on linear product cost regardless of the non-linear product cost, namely manufacturer’s scale diseconomies. So I study the dual-channel under manufacture’s scale diseconomies from three perspectives.Firstly, I study the effects of manufacturer’s scale diseconomies on launching direct channel. In the symmetric-information framework, the manufacturer’s scale diseconomies Bertrand models are proposed between single-channel and dual-channel supply chains. The optimal pricing and profits are compared between single-channel and dual-channel supply chains of Stackelberg competition. This research demonstrates three interesting results. (1)when the retailer has less market shares and the manufacturer’s production exhibits its low diseconomies of scale, the manufacturers decides to launch online direct channels in order to increase profits; (2) if the retailer has less market shares but the manufacturer’s production exhibits its high diseconomies of scale, the manufacturer decline to launch online direct channel; (3) Only if the retailer has more market shares, the manufacturer declines to launch online direct channel. In addition, the retailer’s profits always decreases while the manufacturer launches online direct channel.Secondly, I study the effect of forecast information sharing on manufacture’s launching direct channel under manufacture’scale diseconomies. I show the optional decisions of the manufacture and the retailer when the cost of manufacture is linear and non-linear. Finding: the retailer has no incentives to share its forecast information with the manufacture. Even though the manufacture always launches the direct channel without retailer forecast information with production diseconomies, the retailer can benefit from online direct channel. (1) The retailer suffers from the small production diseconomies; (2) The retailer suffers from the more accurate forecast information and the large production diseconomies; (3) The retailer benefits from the less accurate forecast information and the large production diseconomies. Furthermore, the Nash information sharing compensation mechanism is built to secure Pareto improvements for the retailer and the manufacture.Finally, I study the manufacture encroachment with retailer longitudinal sharing for supplier. Findings:if the proportion of the retailer for supplier is small, the retailer always suffers, namely the "win-lose" outcomes for retailer and manufacture; the retailer can benefits from the manufacture encroachment when the retailer holds moderate shares for manufacture, namely the "win-win" outcomes. However, if the retailer holds more shares for supplier, the supplier does not launch the direct channel. What is the different, if the cost of manufacture is linear, the manufacture always reduces wholesale price; The manufacture raises wholesale price when the manufacture shows diseconomy and the retailer holds less shares; the supplier reduces wholesale price when the supplier shows diseconomy but the retailer holds more shares. In addition, Consumers always benefit only if the manufacture launches the direct channel.