Abstract
<p class="zhengwen"><span lang="EN-GB">In this paper three coordinating contracts in supply chain namely (i) revenue-sharing contract (ii) cost-sharing contract (iii) profit-sharing contract are proposed for two echelon supply chain coordination perspective under promotion and price sensitive demand. In our model buyer makes the promotional decision and undertakes the promotional sales effort cost. It is shown that in decentralized channel the results are sub-optimal. It is found analytically that the revenue-sharing contract coordinates pricing decision but not promotional decision for all values of the promotional effort cost. It is also found that the cost-sharing contract fails to coordinate channel. The profit-sharing contract is demonstrated to coordinate both the pricing and the promotional decisions in the channel.</span></p>
Highlights
In a competitive milieu, the customer demand for any product is dependent on the quality of product as a whole; but, there are other factors which play a vital role in dragging customer's attention to a specific product and increase the sales amount
Our work focuses on coordinating supply chain when the demand is sensitive to both price and promotional sales activities
It is obvious that revenue-sharing contract fails to coordinate the supply chain promotional effort, example (ii), but coordinates the selling price
Summary
The customer demand for any product is dependent on the quality of product as a whole; but, there are other factors which play a vital role in dragging customer's attention to a specific product and increase the sales amount. We subsume the above factors under the category of promotion These are the customers who determine its values and will have a positive influence on the end demand. Take PepsiCo for instance that provides the buyer with retail facility such as refrigerators or vendor machines with company label and logo and expect the buyer to carry just their products. This raises customers' attention and has a positive impact on demand. In our model the buyer's underwrites promotional sales effort to augment customer demand.
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