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Discrete Dynamics in Nature and Society
Volume 2015 (2015), Article ID 424181, 8 pages
http://dx.doi.org/10.1155/2015/424181
Research Article

Pricing Decisions of Competing Tobacco Enterprises with Online Channel

1Research Center of Logistics, Shanghai Maritime University, Shanghai 201306, China
2School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China

Received 25 September 2015; Accepted 4 November 2015

Academic Editor: Paolo Renna

Copyright © 2015 Rong Zhang et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

According to the new measurement of launching online distribution channels of tobacco enterprises in China, this paper investigates the tobacco firm’s pricing decisions on the supply chain which consists of two manufacturers and one retailer under three dual-channel structures. Three dual-channel structures include no online channel, only one online channel by one manufacture, and two online channels by two manufacturers. We apply the Stackelberg game to analyze the equilibrium pricing strategies under different structures and try to explore the necessity and advantages of launching online sales channels. The results demonstrate that the substitutability of a product has significant impact on introducing online sales channels, and the online dual-channel structure could result in less profit for manufacturers compared to the traditional retail channel structure; and thus, a dual-channel structure with online sales is not the best strategy for traditional manufacturers. Moreover, when the product is less substitutable, the effect of the tobacco control on the online sales channel is inferior to the traditional channels and vice versa.