Title: Optimisation of an integrated parallel distribution system by including network marketing

Authors: Mahdi Shafiei; Mohammad Modarres

Addresses: Department of Industrial Engineering, Sharif University, Tehran, Iran ' Department of Industrial Engineering, Sharif University, Tehran, Iran

Abstract: Network marketing is a business model that depends upon a network of distributors for growth, such as in multilevel marketing. A direct selling method features independent agents that make up a distribution network for goods and services. This paper provides a framework to study the network marketing by adopting the traditional channel. To motivate all distributers in network marketing as well as retailers, it is required to design a well-balanced distribution and pricing system. The allocated commission for distributers in different layers of network marketing is part of pricing system, which is vital. In this paper, we develop an approach to determine all elements of system, including product price, wholesale price as well as commissions in network marketing simultaneously. A game model is applied to optimise the pricing and determine commission and number of layer of network marketing structure. A numerical example illustrates our proposed approach for better understanding.

Keywords: distribution channel; pricing; network marketing; optimisation; game theory.

DOI: 10.1504/IJLSM.2020.107387

International Journal of Logistics Systems and Management, 2020 Vol.36 No.2, pp.305 - 318

Received: 14 Sep 2018
Accepted: 05 Nov 2018
Published online: 26 May 2020 *

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