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Coordinating a two-stage supply chain via a markdown money and advertising subsidy contract

Coordinating a two-stage supply chain via a markdown money and advertising subsidy contract This paper explores coordination of a supply chain consisting of one manufacturer and one retailer and studies Pareto condition of coordination mechanism under additive and multiplicative demand uncertainties where the retailer jointly determines order quantity and advertising level. We develop a markdown-money and advertising-subsidy mechanism to coordinate the supply chain in each case of uncertainty. Under a uniform distribution, a higher chargeback rate is along with a higher fraction of advertising expenditure shared by the manufacturer and the coordination mechanism is robust to error form. In the coordinated setting, whether salvage value influences the advertising level depends on the error form. Higher advertising elasticity or scaling constant implies a lower efficiency in each error case due to a higher mean demand, while the effect of the unit salvage value on the efficiency depends on the error form. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Information and Decision Sciences Inderscience Publishers

Coordinating a two-stage supply chain via a markdown money and advertising subsidy contract

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
1756-7017
eISSN
1756-7025
DOI
10.1504/IJIDS.2011.040419
Publisher site
See Article on Publisher Site

Abstract

This paper explores coordination of a supply chain consisting of one manufacturer and one retailer and studies Pareto condition of coordination mechanism under additive and multiplicative demand uncertainties where the retailer jointly determines order quantity and advertising level. We develop a markdown-money and advertising-subsidy mechanism to coordinate the supply chain in each case of uncertainty. Under a uniform distribution, a higher chargeback rate is along with a higher fraction of advertising expenditure shared by the manufacturer and the coordination mechanism is robust to error form. In the coordinated setting, whether salvage value influences the advertising level depends on the error form. Higher advertising elasticity or scaling constant implies a lower efficiency in each error case due to a higher mean demand, while the effect of the unit salvage value on the efficiency depends on the error form.

Journal

International Journal of Information and Decision SciencesInderscience Publishers

Published: Jan 1, 2011

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