Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/80305
Title: Study of behavioral operations in a dual-channel supply chain
Authors: Liu, Chengli
Advisors: Lee, Carmen (ISE)
Keywords: Business logistics
Pricing
Issue Date: 2018
Publisher: The Hong Kong Polytechnic University
Abstract: The purpose of this study is to determine the pricing strategies in a dual-channel supply chain with people's non-hyper-rational behavioral patterns. This study proposes four objectives: 1) analyze the optimal sales effort deployment strategies in dual-channel supply chains; 2) model the overestimation in the newsvendor game; 3) determine the optimal prices and insights for the dual-channel supply chains with overconfident consumers; and 4) determine the optimal prices and insights for the dual-channel supply chains with loss-averse consumers. To fulfill the study objectives, this study first introduces the model of a dual-channel supply chain and discuss the optimal sales efforts deployment problem. A sales effort competition game is set up in the dual-channel supply chain between a manufacturer and a retailer. Interestingly, the optimal sales effort and the profit of the manufacturer and the retailer can be limited by the other's efficiency of sales effort. Next, the newsvendor game with the occurrence of overestimation is studied, to explore the feature of overconfidence. The study shows that overestimation leads to a demand steal effect, which reduces the competitor's order quantity. The issues of overconfidence and loss aversion are then studied in the dual-channel supply chain in sequence. Overconfident consumers are modeled in the first place. This study creates the model of overconfident consumers who are overprecise in their valuation of a product in the dual-channel supply chain by assuming that the consumers choose the channel for buying to maximize their utilities. As a result, the profit of the manufacturer and the retailer are reduced by consumers' overconfidence. Consumers can benefit from overconfidence because lower prices are offered. Then, loss aversion in the dual-channel supply chain is discussed. Products are generally classified into two categories based on their preference utility point: 1) basic product which has a lower reference utility for consumers and 2) luxury goods which have a higher reference utility for consumers. The results encourage manufacturers of basic goods to engage in the dual-channel strategy. However, manufacturers of luxury goods are not suggested to adopt the dual-channel supply chain strategy because the demand for direct channels(i.e. online channel) is negligible if consumers are loss-averse, and the demand for the retail channel remains unchanged compared with the single retail channel supply chain. This study extends the literature on behavioral operations research regarding the dual-channel supply chain. The models of non-hyper-rational behaviors in the dual-channel supply chain are the main contributions of this research, such as the model of the loss aversion of consumers and the model of overconfident consumers. The pricing strategies of the manufacturer and the retailer facing loss-averse consumers and overconfident consumers are presented. The impacts on the profit of the manufacturer and the retailer are studied.
Description: xiii, 194 pages : color illustrations
PolyU Library Call No.: [THS] LG51 .H577P ISE 2018 LiuC
URI: http://hdl.handle.net/10397/80305
Rights: All rights reserved.
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