Marketing-driven channel coordination with revenue-sharing contracts under price promotion to end-customers
This paper explores the equilibrium behavior of a basic supplier-retailer distribution channel with and without revenue-sharing contracts under price promotion to end-customers. Three types of promotional demand patterns characterized by different features of dynamic price sensitivity are considered to rationalize price promotional effects on end-customer demands. Under such a retail price promotion scheme, this work develops a basic model to investigate decentralized channel members' equilibrium decisions in pricing and logistics operations using a two-stage Stackelberg game approach. Extending from the basic model, this work further derives the equilibrium solutions of the dyadic members under channel coordination with revenue-sharing contracts. Analytical results show that under certain conditions both the supplier and retailer can gain more profits through revenue-sharing contracts by means of appropriate promotional pricing strategies. Moreover, the supplier should provide additional economic incentives to the retailer. Furthermore, a counter-profit revenue-sharing chain effect is found in the illustrative examples. Such a phenomenon infers that the more the retailer requests to share from a unit of sale the more it may lose under the revenue-sharing supply chain coordination scheme.
Year of publication: |
2011
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Authors: | Sheu, Jiuh-Biing |
Published in: |
European Journal of Operational Research. - Elsevier, ISSN 0377-2217. - Vol. 214.2011, 2, p. 246-255
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Publisher: |
Elsevier |
Keywords: | Supply chain management Channel coordination Promotional effect Revenue sharing |
Saved in:
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