This paper studies the inventory management problem of dual channels operated by one vendor. Demands of dual
channels are inventory-level-dependent.We propose a multi-period stochastic dynamic programming model which
shows that under mild conditions, the myopic inventory policy is optimal for the infinite horizon problem. To
investigate the importance of capturing demand dependency on inventory levels, we consider a heuristic where the
vendor ignores demand dependency on inventory levels, and compare the optimal inventory levels with those
recommended by the heuristic. Through numerical examples, we show that the vendor may order less for dual
channels than those recommended by the heuristic, and the difference between the inventory levels in the two cases
can be so large that the demand dependency on inventory levels cannot be neglected. In the end, we numerically
examine the impact of different ways to treat unmet demand and obtain some managerial insights.