Retail service for mixed retail and E-tail channels |
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Authors: | Wei Hu Yongjian Li |
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Institution: | (1) Arison School of Business, IDC, Herzliya, Israel 46150;(2) Columbia Business School, Columbia University, New York, NY 10027, USA |
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Abstract: | Together with regular retail channel, a firm can distribute products directly through Internet (referred to as an “e-tail”
distribution channel). The competitive edge of the retail channel lies in more value-added services, some of which are unavailable
through the e-tail channel. We consider a model mixed with retailing and e-tailing distribution channels where the service
level and price decision are made, respectively, ex ante and ex post demand realizations. From the firm’s perspective of managing
the two channels, we acquire the optimal decisions and characterize the effects of the demand uncertainty on the firm’s optimal
retail service and expected profit. Applying stochastic comparison method, we show the firm’s retail service and profit both
increase in the demand mean, and the firm profits from the increase of the convex order of the demand by decreasing his service
level. Further, if the coefficient of the demand increases, we characterize that the firm benefits from it. Finally, several
numerical studies are presented to gain insights. |
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Keywords: | |
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