The pricing strategy of dual-channel supply chain with risk-averse agents and heterogeneous preference consumers

Purpose The purpose of this paper is to investigate the pricing strategy and the impact of agents' risk preference in a dual-channel supply chain in which both agents are risk-averse. Design/methodology/approach The authors make use of the mean-variance (MV) method to measure the risk aversion of the agents and apply Stackelberg game to obtain the optimal strategies of the proposed models. Furthermore, the authors compare the optimal strategies with that in the benchmark model in which no agent is risk-averse. Findings The authors find that the pricing decisions can be divided into four categories according to the risk attitudes of the agents: the decisions that are independent of two agents' risk attitudes, the decisions that depend on only one agent's risk attitude (i.e. depend on only manufacturer's risk attitude and depend on only retailer's risk attitude) and the decisions that depend on both agents' risk attitudes. In addition, the authors find that the retail price will be lower and the wholesale price in most cases will be lower than that in the benchmark when at least one agent's risk control is effective; the demand will be always increasing as long as one agent's risk control is effective. Furthermore, compared to the benchmark, a win-win strategy (i.e. Pareto improvement) for the supply chain members can be obtained in a certain range where the agents' risk controls are appropriate. Originality/value This research provides a theoretical reference for the managers to make the pricing decisions and the risk control in dual-channel supply chains with heterogeneous preference consumers.

Automated summary

The research categorizes pricing decisions based on agents' risk attitudes into four categories: independent decisions, decisions dependent on one agent's risk attitude, and decisions dependent on both agents' risk attitudes. The study shows that effective risk control by at least one agent leads to lower retail and wholesale prices, increased demand, and potential win-win strategies for supply chain members compared to the benchmark model. This provides valuable theoretical insights for managers in making pricing decisions and risk control in dual-channel supply chains with heterogeneous preferences.