Author(s)

Hua Ke and Jiahui Hu

Corresponding Author

Hua Ke

ABSTRACT

This paper studies the optimal customer rebate strategy in a dual-channel supply chain, in which online customers can obtain rebates or return unsatisfactory products. We consider that providing rebates can reduce online customers’ willingness to return. Three rebate strategies are discussed: no one offering rebates, the manufacturer offering rebates and the retailer offering rebates. We investigate the impact of customer preference and rebate strategies on supply chain members’ optimal decisions and manufacturer’s performance. It is found that when the manufacturer offers rebates, wholesale price decreases as more customers prefer the online store. Through the numerical study, we find that the manufacturer can always get more profits by providing rebates.

KEYWORDS

Dual channel, Customer rebate, Customer return, Pricing, Game theory