Abstract
It is common for a supplier to sell products to multiple retailers. In this paper, we investigate the equilibrium behavior of a decentralized supply chain with multiple retailers facing a random price-dependent demand in the additive form. Here, we consider two kinds of demand functions: the distribution of the demand depends only on the retailer’s own retail price (noncompeting retailers) and not only on his own retail price but also on that of the other retailers (competing retailers). We present appropriate wholesale price, buy-back, and lost-sales cost-sharing contracts to coordinate the total supply chain, so that when all the retailers adopt their equilibrium response, the supply chain system coordination is also achieved. Furthermore, the coalition formation among retailers is also analyzed. We find that with buy-back and lost-sales cost-sharing contracts and linear price-dependent demand function, retailers always prefer being in the grand coalition to forming any other coalition.
Highlights
In the present global market, it is common that a supplier provides products to several different retailers
With higher retail prices compared to others, the convenience store still attracts customers because we can get the stuff we need at any time
It is worth noting that the Nash equilibria may not lead to supply chain coordination. erefore, in order to improve the supply chain performance, we develop appropriate wholesale price, buyback, and lost-sales cost-sharing contracts to coordinate the total supply chain. at is, we design appropriate parameter settings so that the resulting Nash equilibria will be identical to the globally optimal solution
Summary
In the present global market, it is common that a supplier provides products to several different retailers. Wang [3] considered joint pricing-production decision problems in supply chains with complementary products for a single period, adopted a multiplicative demand model which is sensitive to sale price, and incorporated the consignmentsales and revenue-sharing contracts into both simultaneousmove and leader-follower games. Different from the existing literature, the novelty of this work is to develop a combination of contracts consisting of appropriate wholesale price, buy-back, and lost-sales costsharing contracts to coordinate a distribution system, which will make the decentralized assembly supply chain behave like a centralized one. Coalition formation among retailers is analyzed, which is rarely issued in previous supply chain coordination literature
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