Contract selection between one supplier and two competing retailers
Rongting Sun1, Yiqun Guo2,3
COMPUTER MODELLING & NEW TECHNOLOGIES 2014 18(12C) 532-540
1 School of Economics and Management, Chang'An University, Xi’an 710064, Shaanxi, China.
2 Xi'an Physical Education University, Xi’an 710068, Shaanxi, China.
3 School of Finance and Economics, Xi'an Jiaotong University, Xi’an 710049, Shaanxi, China.
This paper investigates a contract-selection scheme for coordinating a supply chain consisting of one supplier and two competing retailers. The supplier, as a Stackelberg leader, offers a wholesale-price contract and a quantity-discount contract to two competing retailers; the competing retailers have to choose one of the contracts and decide the quantities they would order. On the basis of anticipated responses and actions of the retailers, the supplier designs the contract combination in order to coordinate the supply chain. Adopting the classic Cournot competition model and using game theory, we show that the contract-selection scheme could coordinate the competing supply chain and provide a relative better performance than the single quantity-discount contract. A numerical study is presented to illustrate the findings.