Optimal decisions in a single-period supply chain with price-sensitive random demand under a buy-back contract

Feng Wang, In Chan Choi

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper studies a single-period supply chain with a buy-back contract under a Stackelberg game model, in which the supplier (leader) decides on the wholesale price, and the retailer (follower) responds to determine the retail price and the order quantity. We analytically investigate the decentralized retailer's optimal decision. Our results demonstrate that the retailer has a unique optimal simultaneous decision on the retail price and the order quantity, under a mild restriction on the demand distribution. Moreover, as it can be shown that the decentralized supply chain facing price-sensitive random demand cannot be coordinated with buy-back contract, we propose a scheme for the system to achieve Pareto-improvement. Theoretical analysis suggests that there exists a unique Pareto-equilibrium for the supply chain. In particular, when the Pareto-equilibrium is reached, the supply chain is coordinated. Numerical experiments confirm our results.

Original languageEnglish
Article number786803
JournalMathematical Problems in Engineering
Volume2014
DOIs
Publication statusPublished - 2014

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Supply Chain
Supply chains
Pareto
Decentralized
Stackelberg Game
Theoretical Analysis
Numerical Experiment
Restriction
Demand
Demonstrate
Experiments
Model

ASJC Scopus subject areas

  • Mathematics(all)
  • Engineering(all)

Cite this

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