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The emergence of e-commerce has prompted firms to redesign their supply chains. On the one hand, manufacturers are easy to adopt the traditional retail channel and online direct channel to sell their products. On the other hand, newly-established online exchange provides the retailers new avenue to readjust their inventories. This paper examines the pricing strategies of a manufacturer and a retailer in the complicated e-commerce environment. We first obtain the equilibrium solutions analytically. Then, we use numerical experiment to show how the price volatility and market share affect the pricing strategies. Our study finds that the price volatility in the online exchange has less impact on the retail price and the direct sale price. However, it has a large impact on the wholesale price.
Date of Conference: 22-23 May 2010