Hybrid marketing channel strategies of a manufacturer in a supply chain: game theoretical and numerical approaches

This paper analyzes how the market power in a supply chain affects a manufacturer’s hybrid marketing channel strategies, considering market transaction costs and the ratio of market size of the online market and the offline market. Also, this paper investigates a price-matching strategy when a manufacturer adds an online channel. This paper shows a number of interesting results: generally, when a manufacturer acts as a Stackelberg follower, the manufacturer chooses a hybrid marketing channel strategy as online costs become very much smaller and the size of the online market is much larger. However, when a manufacturer acts as a Stackelberg leader, the manufacturer has more chances to use a hybrid marketing channel strategy even when the online costs are relatively higher. In addition, a manufacturer may use a price-matching strategy by lowering its prices with the aim to eventually drive the retailer out of the market if the manufacturer perceives that a retailer has more advantages in the offline market and the size of offline market is larger.