Research on Quality Decisions and Coordination with Reference Effect in Dual-Channel Supply Chain

Although supply quality management has been studied extensively, one important marketing phenomenon, that is, reference effect has been rarely considered in dual-channel supply chain quality management literatures. In fact, the quality reference effect is also an important factor which influences consumer purchasing behavior. We aim to explore the influence of the reference effect on the optimal decisions and performance of a dual-channel supply. Thus, we formulate dynamic models that include the product quality reference effect and the service quality reference effect in a dual-channel supply chain system consisting of a manufacturer and a retailer under the different decision-making scenarios. Utilizing differential game theory, optimal decisions are obtained for the product quality and service quality decision under the different decision-making scenarios. In addition, the optimal decisions and profits are compared, then a service cost-sharing coordinating mechanism is proposed and proven to be effective in the supply chain system. The main results show when the initial reference service quality is low, the consumer service quality reference effect is beneficial to the manufacturer. The spillover effect of service quality is not conducive to the retailer and the manufacturer. When the initial reference product quality is low, both online and offline product quality reference effects are beneficial to the retailer and the manufacturer. The stable (or final) reference quality will not be affected by the initial reference quality. The sum of the two members’ profits under decentralized decision making is less than the total profit of the supply chain under centralized decision making. We design a cost-sharing coordinating mechanism to eliminate the double marginal effect.