Abstract:Many contracts, such as buy-back policy, cost-and revenue-sharing policies, are widely applied in the literature for supply chain coordination problem. However, the additional gain from coordination may not necessarily cover the extra administrative costs incurred by applying these contracts. In this paper, a production inventory problem is considered in a two-level supply chain. The problem is formulated as a Stackelberg game. Then, the retail fi xed mark-up (RFM) policy is examined in order to investigate its performance on supply chain. We apply this policy because of its lower administrative costs compared to other policies. We found that RFM policy is not capable of coordinating the channel; however, it leads to considerable improvements over the channel. For example, it is shown that it improves each member's profi t and leads to Pareto improvement over Stackelberg policy. Besides, its average effi ciency is about 96% of that of integrated policy approach.

This paper discusses the interaction between one manufacturer and a single retailer in a channel in which both are willing to optimize their profit by adjusting pricing and advertising decisions. The manufacturer produces and sells a product at wholesale price to the retailer who in turn distributes it to consumers with retail price. The market demand is simultaneously affected by retail price, brand advertising of the manufacturer, and local advertising of the retailer. A Cobb-Douglas demand function is used to demonstrate the relationship between the parameters. Decision variables are two firms' prices and their advertising investments. The problem is modelled under integrated policy and Stackelberg game. Also, we examine Retail Fixed Markup (RFM) policy and investigate its performance on supply chain. Then, the solution under three policies compared by numerical study, and the Pareto-efficient strategy is derived. We found numerically that a properly designed RFM policy improves each member's profit and leads to Pareto improvement over Stackelberg policy. Besides, it improves the total supply chain's profit by 600% in average comparing to Stackelberg policy.