Study of supply chain coordination mechanism based on linear transfer payment contract

A decentralized supply chain can not usually elevate its efficiency to the best. Therefore, a linear transfer payment contract is introduced in this paper with considering sales promotion effort level and the ordering quantity meanwhile. The coordination mechanism is studied. Moreover, the parameters of the linear transfer payment are determined. It shows that the supply chain can be perfectly coordinated by selecting proper parameters of the linear transfer payment contract, and the decentralized supply chain can equal the efficiency of the integrated supply chain. Finally, the efficiency of the decentralized supply chain under the contract is illustrated by a numerical example.