Wholesale Price Contract Research Articles

Loss-averse buyers' optimal procurement decision in a multi-sourcing under e-commerce surroundings

PurposeWith the rapid development of e-commerce, multi-sourcing with supply contracts and spot buying has become more and more popular in reality. The main purpose of the paper is to explore a loss-averse buyer's optimal procurement policy in a multi-sourcing under e-commerce surroundings.Design/methodology/approachThe study introduces the loss aversion utility function to characterize the loss aversion effect and derives a loss-averse buyer's optimal procurement policy in a multi-sourcing with a wholesale price contract and spot market.FindingsA loss-averse buyer could order no items in a wholesale price contract and only needs to replenish commodities from spot market under certain conditions. In addition, the study shows that spot capacity has important influences on a loss-averse buyer's optimal ordering decision in the wholesale price contract.Originality/valueThis is the first paper to study the loss aversion effect on a buyer's procurement decision in a multi-sourcing. The results present important managerial insights for a loss-averse buyer to devise optimal ordering policies in a multi-sourcing under e-commerce surroundings.

Information Disclosure Decision for Tourism O2O Supply Chain Based on Blockchain Technology

(1) Background: With the development of blockchain technology and fierce competition between tourism platforms, tourism platforms can adopt blockchain technology to disclose product information to enhance their core competitiveness. As for a tourism O2O, i.e., online to offline, supply chain, the tourism platform sells the product online, and the tour operator provides services offline. (2) Methods: We establish a game theory model and study the optimal strategies of supply chain members in two scenarios (decentralized and centralized) when the online platform does not adopt or adopts blockchain technology. Then, we introduce a two-part tariff contract for coordination. Furthermore, we discuss the impact of the cost of adopting blockchain technology, disclosing information and the proportion of information-sensitive consumers on the optimal strategies. (3) Conclusions: When the costs of adopting blockchain technology and information disclosure are low, if the proportion of information-sensitive consumers is large, adopting blockchain technology is beneficial to supply chain members. Compared with a wholesale price contract, a two-part tariff contract can encourage the platform to improve information disclosure quality, so the tour operator can adjust their cooperation contract to achieve Pareto improvements. Under a two-part tariff contract, the tourism platforms are more likely to disclose information and can effectively regulate the operational performance of the tourism O2O supply chain.

Coordinating double-level sustainability effort in a sustainable supply chain under cap-and-trade regulation

In recent decades, due to the growing sustainable development concerns, the supply chains members, such as manufacturers and retailers, are interested in investing in environmental sustainability and social sustainability issues to gain more market share in today’s competitive business environment. This paper contributes to the literature by proposing double-level sustainability effort in a sustainable supply chain consists of one manufacturer and one retailer under the cap-and-trade regulation. The manufacturer invests in the technology to reduce carbon emissions and improve the quality of products. On the other hand, the retailer invests in green effort while decides on its periodic review order-up-to-level replenishment policy. Under such a case, both the manufacturer’s and the retailer’s decisions not only affect their individual profitability but also impact on the whole supply chain performance and sustainability level. Using game-theoretic mathematical modeling, the double-level sustainability effort is first analyzed under the decentralized and centralized structures. Then, a compensation-based wholesale price contract is introduced to coordinate the sustainable supply chain under the cap-and-trade regulation. The surplus profit obtained under the coordination plan is shared between the manufacturer and retailer depending on their bargaining power. The data generated based on the assumptions of a pharmaceutical case study is applied to indicate the applicability of developed models. The results illustrate that the developed coordinated system simultaneously enhances the whole sustainable supply chain performance from the social, environmental, and economic points of view.

Quadratic quantity discount contract under price-dependent demand and consumer returns

This study introduces a new type of supply contract, the quadratic quantity discount contract, whose average transfer payment is a quadratic function. Thus, both the total and average quantity discounts increase nonlinearly in order quantity, unlike the typical linear quantity discount contract, whose total discount is nonlinear but average payment is a linear function of order quantity. We reveal the quadratic quantity discount contract’s unique properties by comparing it with linear quantity discount and wholesale price contracts. Our investigation, conducted in basic and closed-loop supply chain situations, reveals the potential of the quadratic quantity discount contract to be considered a serious choice for supply chain managers in various situations. Specifically, we reveal that the quadratic quantity discount contract always coordinates the supply chain, achieving the first-best supply chain profit while always enhancing the profits of all players. This is the most important difference from the typical linear quantity discount contract that entails a profit distribution problem and bargaining power issues. Further, unlike other contracts, its profit improvement performance is predictable; moreover, it offers the acceptable wholesale price with an additional nonlinear average discount. However, when the supplier can exercise its power and only considers its own profit, the typical linear quantity discount contract can be considered the better option, as it produces superior profits for the supplier, but the profits of the retailer and supply chain are sacrificed in this case. If the supplier considers the supply chain’s long-term health and wants voluntary compliance from other players, the quadratic quantity discount contract is the optimal choice.

The choices of channel structures and information strategies in a supply chain

This study considers the choices of channel structures and information strategies in a supply chain with demand uncertainty. The results show the following: (1)The decentralized channel structure dominates the centralized channel structure when the information strategy is given. (2)Information sharing by the downstream rival is always beneficial to the vertically integrated producer but is not necessarily detrimental to itself. In particular, information sharing increases the downstream rival’s profit in the centralized channel structure when the demand signal is relatively accurate. (3)The vertically integrated producer always benefits from the increase in forecast accuracy and the downstream rival may be worse off in some situations, which provides a theoretical ground for the “accuracy trap.” In addition, the discussions of the wholesale price commitment and the uniform pricing contracts show that the wholesale price contracts can influence the information sharing conditions of the downstream rival and the effects of strategic decentralization, eventually influencing the equilibrium strategies of channel members.

Pareto optimality and contract dependence in supply chain coordination with risk‐averse agents

In recent years, research on supply chain coordination (SCC) with risk‐averse agents has received much attention. Previous studies are primarily concerned with the coordination of a single manufacturer–single retailer supply chain using different definitions of SCC. What is lacking is a comprehensive analysis of the achievability of SCC. In this paper, we provide a systematic analysis of SCC with risk‐averse agents. We see that three definitions of SCC have been proposed in the literature to investigate SCC with risk‐averse agents, among which the one based on Pareto optimality (PO) stands out. Here we explore the challenges of using the PO criterion. Specifically, we first examine the standard two‐agent supply chain under the mean–variance (MV) and mean‐downside‐risk (MDR) objectives. What we find is that the achievability of PO depends on the contract type. The wholesale price contract even with a side payment may not lead to PO. Also, unlike under MV where risk sharing is Pareto optimal, we observe that the least risk‐averse agent must take all the risk to achieve SCC under MDR. Importantly, we extend our analysis to multiretailer, multimanufacturer, and multitier supply chains. In each case, we characterize the efficient Pareto‐optimal manifold in the multidimensional space and design coordinating contracts that result in Pareto‐optimal actions acceptable to all agents. We also discover that identifying PO across all the contract forms is difficult when some other risk‐aversion criteria are considered. We conclude by providing suggestions and methods for SCC when we are unable to identify PO.

Contract Design of Logistics Service Supply Chain Based on Smart Transformation

A logistics service integrator (LSI) usually requires a logistics service provider (LSP) to carry out smart transformation in order to improve the level of logistics service. However, LSP’s smart transformation faces uncertainty in terms of investments and income, which seriously hinders LSP’s enthusiasm for logistics service innovation. In this paper, we construct a logistics service supply chain (LSSC) consisting of an LSI and an LSP to explore the incentive mechanism for LSPs to undergo smart transformation. As a benchmark for comparison, we first obtain the equilibrium results under centralized decision making and wholesale price (WP) contracts. Then, cost-sharing (CS), revenue-sharing (RS), and cost sharing–revenue sharing (CS-RS) hybrid contracts are proposed. It is found that when the CS coefficient is in a certain interval, the CS contract can increase the profit of LSI and the smart level of logistics service, but it will decrease the profit of LSP. With the exception that the wholesale price of logistics services will decrease, the equilibrium results under the RS contract and WP contract remain consistent. Only the CS-RS hybrid contract can achieve the perfect coordination of LSSC. In addition, by conducting numerical analysis, we find that the enhancement of the smart effect can encourage LSP to improve the smart level and increase the overall revenue of LSSC. To the best of our knowledge, this paper is the first study to explore the incentive mechanism between LSI and LSP in the context of logistics service smart transformation. Our findings guide the LSI in implementing an effective contract.

Omni-channel retail operations in the presence of strategic customers: The benefit of inventory commitment.

This paper studies the impact of strategic customer behavior on retailers’ omni-channel strategies. Customers in the market are classified into strategic omni-channel customers and myopic B&M (brick and mortar) store customers. The retailer firstly charges a full price but will then salvage the leftover inventory at a lower price (markdown policy) for strategic omni-channel customers after the customers’ demand is realized. The strategic omni-channel customers choose purchase timing to maximize their own expected profit. While, the myopic B&M store customers do not choose purchase timing. By characterizing rational expectation equilibrium, we find that the inventory level under markdown policy is higher than that in the classic model where no markdown policy is implemented. Also, the policy will transfer more strategic customers to the online channel to buy at full price so that the retailer will benefit from it. Besides, inventory commitment policy can further increase retailer’s profit based on markdown policy. In addition, we extend the model to the supply chain and present the contrasting view that the total profit of the decentralized supply chain under the wholesale price contract is higher than that of the centralized supply chain. The influence of strategic customer behavior and system parameters on the retailer’s optimal decision is discussed through numerical study.

Agricultural Supply Chain Coordination under Weather-Related Uncertain Yield

In the context of agriculture, we focus in this paper on a two-echelon supply chain consisting of a supplier facing weather-related yield uncertainty and a retailer facing market-linked demand uncertainty. We mainly investigated how the randomness of yield and demand influences the profit of the supply chain members and the performance of the entire supply chain. We adopted an additive random yield model to capture the effect of uncontrollable weather factors on crop yield. For the case where a wholesale price contract fails to achieve coordination, we propose a revenue-sharing contract with a new structural arrangement and explore its influence on the contract coordination ability. In the revised contract, the retailer purchases all the actual output from the supplier instead of an order quantity; thus, the retailer shares yield risk with the supplier. To look at the implications in detail, we conducted a numerical analysis where the uncertain yield of maize crops originates from the fluctuating rainfall; the results indicate that the revised revenue-sharing contract can achieve supply chain coordination, and all the members improve their profit. This paper shows that by redesigning the contract structure, the classical revenue-sharing contract still has the coordinating ability in the presence of simultaneous yield and demand uncertainties.

Pricing and Contract Coordination of BOPS Supply Chain Considering Product Return Risk

This study proposes a BOPS (buy online and pick up in store) model for a two-echelon supply chain, considering the product return risk to reach an equilibrium result of two omni-channel integration modes, managed by the manufacturer or the retailer, respectively. Furthermore, this study analyzes the impacts of the service cost coefficient and the consumer loyalty of the offline channel on the optimal price, service decision, and profit of different integration modes. This study also compares the profits of enterprises under centralized and decentralized decisions. The results show that centralized decision making can improve the service level of the SA (Store Assistance) effort and the sustainable performance of the supply chain. Whether the BOPS channel is managed by the manufacturer or retailer, the service cost, the product return rate, and the offline channel consumer loyalty have an impact on the decision of product sale price, wholesale price, and SA effort service level. Offline customer loyalty is less sensitive in the BOPS channel managed by the retailer than that managed by the manufacturer. It is suitable for the manufacturer to manage the BOPS channel when offline customer loyalty is low. Otherwise, it is appropriate for the retailer to manage the BOPS channel. The profit of the supply chain under the decentralized decision is less than that under the centralized decision. When executing a wholesale price contract, different omni-channel integration modes can alleviate the double marginalization effect. It can fully coordinate the supply chain members, motivate retailers to improve the service level of the SA effort, and realize Pareto improvement to support supply chain sustainability.

Decisions on Pricing, Sustainability Effort, and Carbon Cap under Wholesale Price and Cost-Sharing Contracts

Rapid economic growth and industrialization have brought material abundance and convenience, but also social and environmental problems such as global warming, climate change, and ozone depletion. For this reason, the public and governments have continued to make efforts to reduce carbon oxide emissions worldwide over the past few decades. To achieve this mission, cap-and-trade regulations have been introduced as one of the most effective market-based mechanisms to control carbon emissions. Accordingly, sustainability efforts, including the development of green products and innovating manufacturing technologies, are being made by companies in supply chains to reduce their carbon emissions. In the context of sustainability innovations and carbon emission constraints, this article investigates pricing decisions, the degree of sustainability efforts, and carbon caps under two different supply chain contracts—in this case, wholesale price contract and cost-sharing contract. This article establishes a Stackelberg game model under each of the supply chain contract types and presents the equilibrium decisions made by players of the game. Major findings of this article reveal that (i) the performance of the supply chain is considerably affected by the presence of a carbon cap; (ii) the higher the carbon cap set by a government is, the more sustainability innovation efforts the supply chain makes; and (iii) the supply chain can improve its profitability and its sustainability under a cost-sharing contract.

Supply chain coordination with information design

AbstractWe consider the coordination of a supplier–retailer supply chain where, in addition to classical contract considerations, a supplier decides the adoption of an information structure (IS) for the supply chain, with a higher‐quality IS allowing the supply chain parties to obtain a more accurate demand forecast. Because a wholesale price contract cannot coordinate the supply chain due to misaligned incentives of supply chain parties, we explore what common coordinating contracts in the classical coordination literature can continue coordinating the supply chain with the IS adoption. Interestingly, our analysis appears to reveal the power of simplicity: some simple classical coordinating contracts (e.g., the buy‐back and revenue‐sharing contracts), though not designed with the IS consideration, still coordinate the supply chain, whereas other more complicated classical contracts (e.g., the quantity flexibility and sales rebate contracts) fail to do so. We derive a general condition for supply chain coordination and show that any contract with a newsvendor‐like transfer payment can coordinate the supply chain.

Negative effect of price-matching policy on traditional retailers in a dual-channel supply chain with different content formats

We investigate a model in which a monopoly supplier distributes two types of its product, physical and electronic products, through a traditional/brick-and-mortar retailer with a wholesale price contract and an online retailer with an agency contract, respectively. The supplier and the online retailer negotiate the royalty rate, which is a ratio of the online retailer’s revenue to the entire revenue of the channel. We also discuss the case in which the supplier imposes the following self-regulation to balance its dual-channel supply chain: the retail price of the online retailer is not lower than the wholesale price for the traditional retailer. What will happen if the supplier employs such self-regulation? Is self-regulation beneficial to the two retailers? To answer these questions, we first derive the equilibrium without such self-regulation. Second, we investigate what happens if the supplier employs such self-regulation. We obtain the following results. First, in the baseline model, an increase in the online retailer’s bargaining power over the supplier benefits the two retailers but harms the supplier. Second, under self-regulation, the wholesale price is strictly higher than that in the baseline model. Third, the retailers’ equilibrium prices are also strictly higher than those in the baseline model. Self-regulation always benefits the online retailer. It benefits the traditional retailer if the online retailer’s bargaining power is sufficiently weak. Furthermore, self-regulation benefits the supplier if the substitutability between the two retailers is not high. However, it reduces consumer and social welfare.

Pricing design and contract selection with customers’ self-control: a strategic analysis

PurposeThe purpose of this paper is to examine how customers’ self-control affects their purchase decisions and to discuss the pricing decisions of the retailer under different forms of contract.Design/methodology/approachThe authors use the literature on hyperbolic discounting to model customers’ self-control problems. In this framework, the authors examine how the customers’ self-control affects the optimal pricing decision and the selection of the optimal contract form when there is a supplier and a retailer in the supply chain.FindingsThe study’s results show that when wholesale price contract is compared with buyback contract, buyback contract is better when customers’ self-control is weak; when quantity-discount contract is compared with wholesale price contract and buyback contract, although quantity discount can encourage customers to purchase more units of products, but both wholesale price contract and buyback contract can be better than quantity-discount contract in some cases. Additionally, the authors demonstrate that revenue sharing contract can increase the supply chain’s profit. The authors also find that sometimes customers’ preplan will lead to the result that the supplier produces more unhealthy products.Originality/valueTo the best of the authors’ knowledge, this is the first study to analyze the decision-making of the retailer by developing an analytical framework combining customer’s self-control and supply chain contract. These results have important implications for the supplier and the retailer that sell vice goods.

Impact of live commerce spillover effect on supply chain decisions

PurposeWith the booming of live commerce, sellers provide products through not only their traditional channels but also the anchors who show products by live broadcast, forming a live commerce supply chain. In fact, such selling mode generates two effects: the live broadcast service of the anchor affects the return rate of products sold live (live commerce effect) and related products of the manufacturer sold via its own channel (live commerce spillover effect). In this paper, the authors investigate the impacts of both live commerce and live commerce spillover effect on the price decisions as well as the anchor's service effort.Design/methodology/approachThe authors establish a live commerce supply chain model where the manufacturer sells related products directly and by the anchor with a wholesale price contract. The manufacturer decides the price of product sold directly based on the anchor's broadcast effort since there exists the live commerce spillover effects. Backward induction is used to solve the Stackelberg game between the manufacturer and the anchor.FindingsThe results show that (1) the existence of the live commerce spillover effect brings more profit to the manufacturer while it reduces the anchor's profit. Moreover, the total profit of the live commerce supply chain first decreases and then increases as the intensity of the live commerce spillover effect improves. (2) The pricing of products sold directly by the manufacturer and sold through the anchor is nonmonotonic with respect to the live commerce spillover effect. (3) The increase in return cost always leads to an increase in the profit of the anchor, whether it is borne by the anchor or by the consumer. (4) If the baseline return probability is high, the anchor should increase her effort, thus securing more profit. However, the spillover effect of live commerce and the horizontal differences between products will discourage the anchor from increasing the live streaming service level.Originality/valueThe study proposes the live commerce supply chain model where the anchor balances the cost and benefit of her live broadcast effort, which lowers the consumers expected return possibility. In addition the live commerce spillover effect is introduced, reducing the expected return rate for the related products without live broadcast (in the direct channel). With the inter-influence of live commerce, the price competition between the live anchor and the manufacturer becomes more complex. By solving the typical live commerce game model, managerial insights are given for the decision makers among the live commerce supply chain.

Contract choice and advance selling strategy in a supply chain of FAP.

The advance selling (AS) has been widely applied in fresh industry for it can elevating the customer experience and increase flexibility thus profit for a retailer. However, the introduction of the AS will have an impact on spot market in pricing strategy, market share and the profit of the retailer. Hence, to coordinate the supply chain and improve the efficiency of the agricultural supply chain, a two-stage game theory model is constructed to analyze the effects of AS on three classic contracts: wholesale price, quantity discount and revenue-sharing contract. This paper also discusses the boundary conditions of whether a retailer should sell in advance. The conclusions of this paper are as follows: First, revenue-sharing contracts are superior to wholesale price and quantity discount contracts when retailers sell in advance, the wholesale price contract can perform better than the quantity discount contract in the presence of AS if the contract parameter is properly set. Second, a revenue-sharing contract that normally coordinates the supply chain can performs poorly when the retailer sells in advance that the social welfare would be higher if using a quantity discount contract instead. These conclusions have important implications for suppliers when retailers sell in advance. Such suppliers need to design appropriate contracts to distribute FAP that carefully take into consideration the AS activities in the market.

How to Implement the Wholesale Price Contract: Considering Competition between Supply Chains

How to Implement the Wholesale Price Contract: Considering Competition between Supply Chains

Which operating mode is the best? Consider different combinations of sales contracts and service methods

According to the different sales contracts and service methods, we propose four supply chain operating modes, that is, the manufacturer provides the service and adopts the wholesale price contract (MW mode); the retailer provides service and adopts the wholesale price contract (RW mode); the manufacturer provides service and adopts the consignment contract (MS mode); the retailer provides service and adopts the consignment contract (RS mode). In this paper, we develop a dual-channel supply chain consisting of a manufacturer and a retailer to explore the best operating mode for the firms, in which the manufacturer sells products through both online and offline channels. Our analysis shows that there are two thresholds for the deduction rate r1, r2, and r1<r2. If the manufacturer/retailer has absolute power: when r<r2/r<r1, the best mode for the manufacturer/retailer is MS/MW; when r>r2/r>r1, the best mode for the manufacturer/retailer is MW/MS. In addition, if the manufacturer/retailer decides the service method and the retailer/manufacturer decides the sales contract, when r<r1/r<r2, the best mode for both parties is MW/MS; when r>r1/r>r2, the best mode for both parties is MS/MW. Furthermore, the Shapley contract and revenue sharing contract are designed to achieve the coordination of the supply chain under the best mode.

Decision-Making and the Contract of the Complementary Product Supply Chain Considering Consumers' Environmental Awareness and Government Green Subsidies.

The environmental awareness of consumers and enterprises has gradually increased, and green production and green consumption have become the main theme of social economy. On the other hand, the complementary product market has become an important source of competitive advantage for enterprises. Considering a complementary product supply chain, and taking account of the consumers’ environmental awareness and the green subsidies provided by the government, this paper examines members’ decisions in relation to four contract models based on game theory. By solving the model, it is shown that the government’s green subsidy plan improves the green degree of subsidized products and complementary products. Furthermore, compared to wholesale price contracts, revenue-sharing and cost-sharing contracts motivate manufacturers to improve the greenness of subsidized products, and they achieve a Pareto improvement for the whole supply chain and its members, when the contract parameters are appropriate. Numerical experiments also reveal that both the greenness of the complementary products and the profit for members increase with the green innovation spillover effect as a result of the complementary products and the scale of green consumers with environmental awareness in the market. This study provides good guidance for decision-making concerning the complementary product supply chain, and further contributes to environmental protection.

Wholesale-price vs cost-sharing contracts in a green supply chain with reference price effect under different power structures

PurposeThis research aims to examine which cooperative contract (wholesale-price contract or cost-sharing contract) can more effectively upgrade the green degree of product and promote demand when considering consumer reference price effect under different power structures.Design/methodology/approachThis research investigates a dyadic green supply chain composed of one manufacturer and one retailer. Four Stackelberg game models with a cost-sharing contract or a wholesale-price contract are built in retailer-led and manufacturer-led scenarios, respectively. Using backward induction, the optimal green decision under each model is obtained. In addition, the optimal cooperative contract is proposed by comparing these four models.FindingsIt is found that under consumer reference price effect, a cost-sharing contract outperforms a wholesale-price contract in upgrading product greenness and promoting demand. Under any single contract, the retailer-led situation is more conducive to improving product greenness than the manufacturer-led situation. Moreover, consumer reference price effect would reduce the sharing ratio of a cost-sharing contract when the manufacturer dominates, but it could mitigate the problem of double marginalization by reducing wholesale and retail prices under both types of contracts, which would enhance consumer surplus.Originality/valueIt is a new attempt to incorporate consumer reference price effect and power structure into a green supply chain framework and proposes a novel demand function that simultaneously emphasizes consumer reference price effect, consumer environmental awareness and product green attribute. In addition, it provides managerial insights for business managers to choose green cooperative contracts with consumer reference price effect under different power structures.