Price Stickiness in a Dual‐Channel Supply Chain

ABSTRACT In this paper, we investigate price stickiness in a dual‐channel supply chain where a manufacturer sells its product directly through an online retailer and indirectly through an offline retailer. We construct a noncooperative game where the manufacturer and the offline retailer decide whether or not to costlessly adjust their prices after a demand shock. If the demand shock is positive, then no price can be sticky at the unique Nash equilibrium. If the demand shock is negative, then we additionally observe equilibria where some or all prices can be sticky. We also show that no equilibrium is always Pareto optimal.