Manufacturer uniform pricing and channel choice in random demand

In this paper, we investigate a simple two-echelon supply chain system with a manufacturer and a retailer. During a single sale season, the manufacturer sells his brand product either only through the retailer (retail-only channel), or both through a retail channel and an internet channel (dual channel). And the end demand not only dependents on price but on channel members' marketing effort. The retailer provides marketing effort only in the retail channel, and the manufacturer gives marketing effort only in the internet channel. On the basis of the joint price and marketing effort dependent newsvendor model, we investigate the manufacturer's channel choice as well as pricing, marketing effort and inventory decisions in consignment contract scenario. As a Stackelberg leader, the manufacturer determines the final retail price, sales revenue share ratio and the ordered product quantities, and the retailer as a follower decides the retail channel marketing effort. We find that, under such a contract, manufacturer's channel selection decision depends critically on demand price elasticity, sales revenue share ration, channel cost and demand fluctuation. In particular, if the prior agreed sales revenue share ratio is quite high or price elasticity of demand is comparatively low, the increase of demand fluctuation will not only enhance manufacturer's willingness to add internet channel but also strengthen retailer's preference of dual channel.