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A Mutual Subsidy Mechanism for a Seasonal Product Supply Chain Channel Under Double Price Regulation

Author

Listed:
  • Hongjun Peng

    (College of Economics and Management, Nanjing Forestry University, Nanjing 210037, P. R. China)

  • Tao Pang

    (Department of Mathematics, North Carolina State University, Raleigh, NC 27695-8205, USA)

  • Fuliang Cao

    (College of Forestry, Nanjing Forestry University, Nanjing 210037, P. R. China)

  • Juan Zhao

    (Department of Mathematics and Physics, Hefei University, Hefei 230013, P. R. China)

Abstract

In this paper, we consider the decision-making and coordination mechanism of a seasonal product supply chain channel over a period consisting of a low season and a high season, where the price of the final product is strictly regulated, and the raw material is subject to a price cap regulation during the high season. The optimal decisions and profits under decentralized and centralized cases are derived for the low season and the high season. Our research indicates that, under the double price regulation, the manufacturer’s raw material order in the channel usually is not completely fulfilled during the high season and the order during the low season is usually small. Based on the results, we propose a mutual subsidy mechanism, in order to encourage the supplier to supply more raw material during the high season and to encourage the manufacturer to order more raw material during the low season.The theoretical results indicate that the mutual subsidy mechanism can effectively coordinate the seasonal product supply chain channel under the double price regulation, which is further verified by a numerical example. Moreover, the negotiation skills of the supplier and the manufacturer are also considered under the mutual subsidy mechanism, so that the spillover profit can be allocated on a win–win basis for both sides.

Suggested Citation

  • Hongjun Peng & Tao Pang & Fuliang Cao & Juan Zhao, 2018. "A Mutual Subsidy Mechanism for a Seasonal Product Supply Chain Channel Under Double Price Regulation," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(06), pages 1-26, December.
    • Handle: RePEc:wsi:apjorx:v:35:y:2018:i:06:n:s0217595918500471
    DOI: 10.1142/S0217595918500471
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