Paper Info
Title
Simplicity Is Beauty: Pricing Coordination In Two-Product Supply Chains With Simplest Contracts Under Voluntary Compliance
Abstract
Pricing is an important topic in supply chains. In this paper, we explore the coordination challenge with the use of simplest contracts for the case with two products. To be specific, we consider a single-manufacturer single-retailer make-to-order supply chain. In the base model, we consider the case when the product demands are independent and derive the optimal pricing decisions under a decentralised setting. Comparing with the centralised setting, we show that double marginalisation in the decentralised setting reduces the supply chain efficiency by 25%. We then find that the simpler contracts such as the three-parameter two-part tariff (3P-TT) contract and the three-parameter revenue sharing (3P-RS) contract can coordinate the two-product supply chain. We extend the analysis in two cases: (i) the case when the products are substitutable and (ii) the case when the retailer is risk averse, and show that both the 3P-TT and 3P-RS contracts can coordinate the respective supply chain. We also find that the degrees of product substitution and retailer's risk averse significantly influence the supply chain performance.
Year
DOI
Venue
2019
10.1080/00207543.2018.1530474
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH
Keywords
DocType
Volume
pricing, supply chain coordination, contracts, two-part tariff, revenue sharing contract, voluntary compliance
Journal
57
Issue
ISSN
Citations 
9
0020-7543
1
PageRank 
References 
Authors
0.36
17
3
Name
Order
Citations
PageRank
bin shen1716.79
Xiaoyan Xu221.06
Tsan-Ming Choi3104075.03