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The purpose of this paper is to investigate the impact of wholesale price discrimination by a manufacturer in a retailer–e-tailer dual-channel supply chain for different product categories based on their online channel preference.

This paper considers a dual-channel supply chain comprising of a retailer and an e-tailer engaged in competition. Game-theoretic models are developed to model the competition between the retailer and e-tailer and to derive their optimal price, optimal order quantity and optimal profit under (1) equal wholesale price strategy and (2) discriminatory wholesale price strategy. Further, a numerical example was employed to quantify the results and to capture the variation with respect to online channel preference of the product.

It is beneficial for the manufacturer to adopt a discriminatory wholesale price strategy for products having both high online channel preference and low online channel preference. However, equal wholesale price strategy is beneficial for the e-tailer and the retailer in the case of products having high online channel preference and in the case of products having low online channel preference, respectively.

The study helps the manufacturers to maximize their profit by adopting the right wholesale price strategy considering the online channel preference of the product when the manufacturers are supplying to heterogeneous retailers.

There is scant literature on the wholesale price strategy of the manufacturer considering the heterogeneous downstream retailers. This paper contributes the literature by bridging this gap. In addition, the study establishes a link between the wholesale price strategy and online channel preference of the product.

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Mr Peter Lenk has transferred from the Fraunhofer‐Institut to mls munich laser systems since 1 July 1987. Prior to this move, Mr Lenk was employed at the Fraunhofer Institut für Festkörpertechnologie in Munich, where he organised and set up the procedures for the Institute's thick film technology department, supervised the complete film processing for thick film technology and research to prove the authenticity of thick film resistors. Mr Lenk also supervised and conducted training in thick film technology.