Title: Contract mechanisms for coordinating a supply chain with price and sales-effort dependent demand
Abstract: This paper considers a two-stage supply chain with a Buyer and a Supplier, where the endconsumer demand is influenced by two factors, namely the price of the product and the saleseffort made by the Buyer. It is assumed that the Buyer makes the sales-effort decision and incurs the associated cost. Furthermore, it is assumed that all the information is common knowledge to both the Supplier and the Buyer. In this setting, decentralized decision-making leads to a misalignment for both the pricing decision and the sales-effort decision, resulting in sub-optimal supply chain profits. To overcome this issue, various contract mechanisms are analyzed for their ability to provide supply chain coordination and win-win opportunities. It is demonstrated that two well-known contracts, namely cost sharing and revenue sharing do not coordinate the SC for all parameter settings. However, it is shown that a contract that combines revenue sharing and cost sharing can lead to the maximum supply chain profit and win-win opportunities for all parameter values.
Publication Year: 2009
Publication Date: 2009-01-01
Language: en
Type: article
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Cited By Count: 1
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