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Coordinating Contracts for Two-Echelon Supply Chain with Price and Promotional Sensitive Demand

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  • Hooman Abdollahi
  • Mohammad Talooni

Abstract

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.

Suggested Citation

  • Hooman Abdollahi & Mohammad Talooni, 2016. "Coordinating Contracts for Two-Echelon Supply Chain with Price and Promotional Sensitive Demand," Modern Applied Science, Canadian Center of Science and Education, vol. 10(7), pages 132-132, July.
    • Handle: RePEc:ibn:masjnl:v:10:y:2016:i:7:p:132
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    References listed on IDEAS

    as
    1. Fernando Bernstein & Awi Federgruen, 2007. "Coordination Mechanisms for Supply Chains Under Price and Service Competition," Manufacturing & Service Operations Management, INFORMS, vol. 9(3), pages 242-262, January.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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