Population internet penetration rate and channel supply chain players' performances

Byline: Ruiliang Yan, John Wang, Sanjoy Ghose With the rapid development of the internet, the population internet penetration rate plays a strategic importance in the dual-channel supply chain. In this research, we use a game-theoretic approach to examine the effect of the population internet penetration rate on the performances of the manufacturer and traditional retailer under the Stackelberg and Bertrand competitive models. Our results suggest that an increase in the population internet penetration rate always has a negative impact on the manufacturer and traditional retailer's profits. Furthermore, when the product is more suitable for the online market, the traditional retailer will be hurt more by the population internet penetration rate. For the manufacturer, although a larger product web fit can increase profits, the population internet penetration rate has a stronger impact on profitability, thus decreasing profits even as the product web fit increases. Our results also suggest that both the manufacturer and the retailer can adopt either of the Stackelberg and Bertrand competitive market structures in the dual-channel supply chain since their profits are unaffected by the two models. The managerial implications of our results are discussed and the probable paths of future research are identified.