Study of Price Discount Contract on Coordinating Three-Level Supply Chain

This paper studies price discount contract coordination of a three-level supply chain. Under the stochastic market demand, previous price discount contract did not consider shortage cost. We present an approach by adding out-of-stock cost parameters which improves price discount contract of three-level supply chain. The supply chain can reach coordination and the optimal profits of the supply chain can be achieved. Finally, an example illustrating comprehensive evolution method is simple and effective.