Group for Research in Decision Analysis

Consignment contracts with cooperative programs and price discount mechanisms in a dynamic supply chain

Alessandra Buratto University of Padova, Italy

This paper investigates whether a supply chain can achieve coordination by implementing two mechanisms: a cooperative advertising program and a price discount mechanism. We start by analyzing a consignment contract with a revenue sharing agreement, in which a manufacturer decides both the price and the quality investment while the retailer sets the store advertising efforts. The manufacturer is the brand owner and increases the goodwill of its business by quality and pricing. We solve three dynamic games, in which the manufacturer is the Stackelberg leader, and compare the related solutions.

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