Optimal service policy in the presence of demand referral and online word-of-mouth

Abstract

This paper studies an online retailing supply chain system in which infomediary provides demand referral service to Internet retailer. We assume that the online demand is affected by retailer price, referral service effort and word-of-mouth. The demand function is developed based on Bass's model. A service cooperation model is established and then the optimal decisions of retailer's price and infomediary's effort in decentralized supply chain are presented. Moreover, the supply chain profits and cumulative sales in supply chain equilibrium are analyzed under several parameters respectively.