Impact of Consumer Strategic Behavior on the Supplier Channel Selection in a Retailing Platform

Abstract

Flourishing online retailing has spawned the agency selling channel, which motivates suppliers to choose among traditional reselling (R), agency selling (A), and hybrid channel strategies (H). In this paper, considering a supplier and a retail platform facing strategic consumers, we develop a Stackelberg game to examine the equilibrium pricing under three channel strategies and further analyze the impact of consumer strategic behavior on the supplier’s channel selection. Results indicate that consumer strategic behaviors induce the intertemporal competition, by reducing the price difference between the two periods. Meanwhile, channel competition can mitigate the effect of strategic behaviors. Furthermore, supply chain members also employ different pricing policies in accordance with channel strategies to respond to more strategic consumers. Specifically, prices would be raised to acquire high-valued consumers in Strategy H, while “small profits but quick turnover” would be taken in the pure channel strategies. Moreover, the supplier optimal channel strategy is a threshold strategies of commission rate, below which Strategy H is preferred, and Strategy R is preferred otherwise, noticing that Strategy A is never be selected. Interestingly, we find that the supplier, retail platform, and consumers could be better off at the same time only when the hybrid channel strategy is selected.