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Coordination in competitive dual sales channels of the mobile phone industry

This paper examines the supply chain coordination and contracting issue for competitive dual sales channels of the mobile phone industry in which a telecom service operator (operator) cooperates and competes with a handset manufacturer (manufacturer) to deliver the complementary telecom service and handset to end consumers. After deriving the equilibrium strategy based on the game theoretical paradigm, we present the sensitivity and comparative analysis as well as the coordination analysis. Among others, our result shows that the widely used subsidy-only contract fails to coordinate this dual sales system. To solve the coordination failure, we propose a two-way revenue sharing contract that can be well utilized to realize the first best outcome, and even guarantee the win–win situation, in particular under the situation when the telecom service price is sufficiently high.