A Game-Theoretic Exploration with Surplus Profit-Sharing in a Three-Channel Supply Chain, Featuring E-Commerce Dynamics

Abstract

Abstract In a three-channel supply chain, coordination can be especially challenging especially when a manufacturer has to work with a retailer and an online platform. In such a scenario, sales efforts can be critical to the success of the supply chain. However, there is a risk of free riding behavior by either the retailer or the manufacturer, which can lead to suboptimal sales performance. This article will explore the centralized and the decentralized models by the use of game theory (Nash and Stackelberg) and eventually tries to coordinate the three-channel supply chain with the help of Operational Research (OR) to optimize the decision-making and create a win-win situation. Numerical examples are provided to prove the efficiency of the presented models. Finally, the models are evaluated through sensitivity analysis, and managerial insights are provided to enhance the applicability of the models for coordinating a three-channel supply chain.