Coordination through Revenue Sharing and Bargaining in a Two-stage Supply Chain

Coordination is essential for improving supply-chain wide performance. In this paper, we focus on a two-stage supply chain consisting of one supplier and one retailer, between which the transaction quantity is sensitive to the inventory level offered by the supplier. The coordination between the two parties is achieved through revenue sharing and bargaining so that their respective profit is better than that resulted from a decentralized optimization. The two key parameters, namely the supplier´s inventory quantity and the range of the revenue-sharing fraction are obtained, and numerical examples of the contracts for various scenarios are also given.