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Sales effort free riding and coordination with price match and channel rebate

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  • Xing, Dahai
  • Liu, Tieming

Abstract

This paper studies sales effort coordination for a supply chain with one manufacturer and two retail channels, where an online retailer offers a lower price and free-rides a brick-and-mortar retailer’s sales effort. The free riding effect reduces brick-and-mortar retailer’s desired effort level, and thus hurts the manufacturer’s profit and the overall supply chain performance. To achieve sales effort coordination, we designed a contract with price match and selective compensation rebate. We also examined other contracts, including the target rebate contract and the wholesale price discount contract, both with price match. The numerical analysis shows that the selective rebate outperforms other contracts in coordinating the brick-and-mortar retailer’s sales effort and improving supply chain efficiency.

Suggested Citation

  • Xing, Dahai & Liu, Tieming, 2012. "Sales effort free riding and coordination with price match and channel rebate," European Journal of Operational Research, Elsevier, vol. 219(2), pages 264-271.
  • Handle: RePEc:eee:ejores:v:219:y:2012:i:2:p:264-271
    DOI: 10.1016/j.ejor.2011.11.029
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    References listed on IDEAS

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    Cited by:

    1. Moussawi-Haidar, Lama & Çömez-Dolgan, Nagihan, 2017. "Percentage rent contracts between co-stores," European Journal of Operational Research, Elsevier, vol. 258(3), pages 912-925.
    2. Tsao, Yu-Chung & Lu, Jye-Chyi, 2016. "Trade promotion policies in manufacturer-retailer supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 20-39.
    3. Chiu, Chun-Hung & Choi, Tsan-Ming & Hao, Gang & Li, Xun, 2015. "Innovative menu of contracts for coordinating a supply chain with multiple mean-variance retailers," European Journal of Operational Research, Elsevier, vol. 246(3), pages 815-826.
    4. repec:eee:ejores:v:262:y:2017:i:1:p:108-122 is not listed on IDEAS
    5. repec:eee:joreco:v:30:y:2016:i:c:p:84-95 is not listed on IDEAS
    6. Ma, Peng & Wang, Haiyan & Shang, Jennifer, 2013. "Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts," International Journal of Production Economics, Elsevier, vol. 146(2), pages 745-755.
    7. repec:eee:proeco:v:196:y:2018:i:c:p:198-210 is not listed on IDEAS

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