Analysis of Subsidy Decision for Telecom-Operator in a Two-Echelon Supply Chain

We consider a two-echelon decentralized supply chain of customized handset with a telecom-operator as a leader and a manufacturer as a follower. Operator gives subsidy to handsets in the form of providing free communication services for customers in one period. In this setting, operator´s decision does affect the efficiency of supply chain. This paper claims that operator is able to find optimal decision to maximize its profits and increase the total supply chain profits. This paper constructs a profit model to solve this problem, discusses the optimal decision, and numerical examples are given to illustrate the solutions.