Analysis of Double Marginalization Effect on the Wholesale Price Contract Coordination

Xin Fang
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Xin Fang: School of Business Planning, Chongqing Technology and Business University, Chongqing 400067, P. R. China2Chongqing Engineering Research Center for Processing, Storage and Transportation of Characterized Agro-Products, Chongqing 400067, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2018, vol. 35, issue 02, 1-15

Abstract: Due to double marginalization effect, the wholesale price contract has been proved that it cannot coordinate a decentralized supply chain (DSC) based on the framework of Stackelberg game, in which the upstream firm acts as a leader and the downstream firm acts as a follower. Nevertheless, it has shown that the partnership between the enterprises tends to be equality. Motivated by this factor, this paper studies the coordination of wholesale price contract under the perspective of equality between enterprises. First, an innovative wholesale price contract is constructed and to prove that the constructed contract can flexibly coordinate the DSC. Second, the adaptability of the constructed contract is analyzed and compared with the revenue sharing contract, which is designed under the framework of Stackelberg game. Third, numerical analysis is calculated to verify the effectiveness and operation of the model.

Keywords: Double marginalization effect; wholesale price contract; Stackelberg game; supply chain (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0217595918400055

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