Coordinating a Three-Stage Supply Chain with Retail Price and Effort Level under Random Demand

Most research literature pays attention to the contract coordination of the two-stage supply chain, however supply chain often consists of more than two separate firms. This paper aims to study the coordination issue of a three-stage supply chain selling short life cycle products in a single period model. The combined contracts mechanism that a buy-back contract between the retailer and the distributor and a revenue-sharing contract between the manufacture and the distributor cannot coordinate the channel under random demand while these two processes use the same quantity discount contract can coordinate the three-stage supply chain. We show that the three-stage supply chain can be fully coordinated by designing appropriate contract parameters.