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Supply chain contracts with price and effort dependent demand

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  • S. Yamini

Abstract

Supply chain contracts play a crucial role in enhancing the productivity and performance of the system. Manufacturers often use returns policy as a mechanism for encouraging the retailers to stock more and to insure them against excess inventory. This study considers the distribution of goods in a supply chain, where the demand is dependent on promotional effort and selling price. Using a game theoretic framework, the paper presents an assessment of the strategic effect of two contracts namely, wholesale price policy and returns policy and it also highlights its implications on profitability. The ability of returns policy with price and effort dependent demand function to achieve coordination in the supply chain is analysed. The results from the mathematical model demonstrate that it is difficult to coordinate the supply chain using returns policy when the demand is influenced by promotional effort and selling price.

Suggested Citation

  • S. Yamini, 2022. "Supply chain contracts with price and effort dependent demand," International Journal of Services and Operations Management, Inderscience Enterprises Ltd, vol. 41(1/2), pages 184-202.
    • Handle: RePEc:ids:ijsoma:v:41:y:2022:i:1/2:p:184-202
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