The manufacturer's dual-channel strategy with consumers' geographical distribution

In this study, we explore the manufacturer's dual-channel strategy by considering the geographical distribution of consumers. There are two parts of consumers in the market: one part is close to the retailer while another part is far away. The manufacturer can choose single-channel or dual-channel strategies to sell products. A mathematical model is developed to capture two parts of consumers' purchasing behavior. The equilibrium results in the two strategies are derived by using the backward induction method and the sensitivity analysis of the parameter on equilibrium prices is examined. We also provide numerical experiments to investigate the manufacturer's dual-channel strategy. We show that the market capacity of consumers far from the retailer does not affect the retailer's demand and profit and the dual-channel strategy benefits the manufacturer only when the market capacity of consumers far from the retailer is high.