Abstract
This paper develops a game theoretic model of a one-manufacturer and one-retailer supply chain allowing the second ordering to investigate how to coordinate the order quantity and advertising investment via a markdown money-cooperative advertising contract. We focus on the effects of allowing the second ordering on equilibrium outcome and coordination mechanism. We find: the relationship between the unit wholesale prices and the chargeback rate depends on whether allowing the second ordering; the coordination mechanism is robust to demand uncertainty; the unit wholesale price in period 2 increases with the unit production cost in period 2, the unit delayed delivery cost and unit salvage value if and only if the chargeback rate is sufficiently small while that in period 1 is independent of them. In addition, we study the Pareto condition of coordination mechanism under which both manufacturer and retailer are better off using the coordination mechanism and find that the unit production costs in different periods may have contrary effects on the bounds of Pareto range.
Highlights
In business world, advertising is an important tool of sales promotion for retailer/seller, which raises the supply chain’s profitability
This paper develops a game theoretic model of a one-manufacturer and one-retailer supply chain allowing the second ordering to investigate how to coordinate the order quantity and advertising investment via a markdown money-cooperative advertising contract
We develop a game theoretic model of a supply chain consisting of one manufacturer and one retailer under demand uncertainty to investigate how to coordinate the order quantity and advertising investment decisions, and explore the effects of allowing the second ordering on the coordination mechanism
Summary
In business world, advertising is an important tool of sales promotion for retailer/seller, which raises the supply chain’s profitability. At the end of selling season, the retailer is allowed to make the second ordering for unsatisfied demand. They use this policy to reduce the loss incurred by demand uncertainty. If there were unsatisfied demand, Obemeyer would allow retailers to make the second ordering to replenish for popular items during the selling season. We develop a game theoretic model of a supply chain consisting of one manufacturer and one retailer under demand uncertainty to investigate how to coordinate the order quantity and advertising investment decisions, and explore the effects of allowing the second ordering on the coordination mechanism.
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