Game-theoretic analysis of supply chain coordination under advertising and price dependent demand

Supply chain members cannot act independently and they need to act as a part of a unified system and coordinated with other members. Therefore, a coordination mechanism may be necessary to motivate members to achieve coordination. In this paper, the coordination problem is studied in a two-level sup...

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Bibliographic Details
Main Authors: Mona Taheri, Seyyede Rozita Ebrahimi, Farid Khoshalhan
Format: Article
Language:English
Published: Growing Science 2014-06-01
Series:International Journal of Industrial Engineering Computations
Subjects:
Online Access:http://www.growingscience.com/ijiec/Vol5/IJIEC_2014_12.pdf
Description
Summary:Supply chain members cannot act independently and they need to act as a part of a unified system and coordinated with other members. Therefore, a coordination mechanism may be necessary to motivate members to achieve coordination. In this paper, the coordination problem is studied in a two-level supply chain consisting of a supplier and a retailer where demand is a function of price and advertising expenditures in two scenarios. The first scenario is “No coordination”, and the other scenario is “coordination with Revenue sharing contract”. The models are solved using game theory, Cooperative and Nash equilibrium. Finally, numerical examples are presented indicating that the average expected profit in the second scenario, coordination with revenue sharing, is higher than the first scenario. In addition numerical examples indicate that as price and advertising elasticity to demand increase, profitability of supply chain decreases.
ISSN:1923-2926
1923-2934