Title :
Linear penalty contract for coordinating capacity procurement and sales promotion
Author :
Lu, Guangsong ; Li, Xingguo ; Gu, Dongxiao
Author_Institution :
Dept. of Manage. Eng., Anhui Inst. of Archit. & Ind., Hefei
Abstract :
A typical supply chain setting is analyzed, where the supplier´s capacity building and the retailer´s sales promotion needs to be launched simultaneously before demand is realized. Firstly it is demonstrated that the contract of a wholesale price with a lump sum transfer can coordinate the supply chain only when it is enforced under forced compliance. However forced compliance is not a realistic assumption. For coordinating the supply chain, a linear penalty contract is proposed, in which the supplier´s penalty is linear with the capacity deficiency. And with the linear penalty contract the supply chain´s optimal solution is the unique Nash equilibrium.
Keywords :
contracts; promotion (marketing); sales management; supply chain management; Nash equilibrium; coordinating capacity procurement; linear penalty contract; sales promotion; supply chain setting; capacity procurement; contract; sales promotion; supply chain;
Conference_Titel :
Service Operations and Logistics, and Informatics, 2008. IEEE/SOLI 2008. IEEE International Conference on
Conference_Location :
Beijing
Print_ISBN :
978-1-4244-2012-4
Electronic_ISBN :
978-1-4244-2013-1
DOI :
10.1109/SOLI.2008.4682782