We explore the manufacturer's incentives to use a dual-channel supply chain rather than only a direct or an indirect channel in simultaneous price competition. We first revisit the demand formulation widely used in the context of channel analysis and introduce a different demand formulation whose market size is constant with respect to the number of channels. We then show that when an entrant exists, a dualchannel strategy benefits the manufacturer because it weakens competition, even if the indirect channel is less efficient. Still, such a dual-channel strategy never benefits the manufacturer when there is no entrant.
Direct distribution Dual-channel supply chain Channel conflicts