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Coordination of a socially responsible two-stage supply chain under price-dependent random demand

Xia Zhao () and Runsheng Yin
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Xia Zhao: Nanjing University of Finance and Economics
Runsheng Yin: Michigan State University

4OR, 2018, vol. 16, issue 4, 379-400

Abstract: Abstract This paper investigates the coordination problem of a supply chain (SC) composed of a manufacturer exhibiting corporate social responsibility (CSR) and a retailer faced with random demand. The random demand is made up of the multiplication of price-dependent demand and random demand factor (RDF), plus the CSR-dependent demand. The centralized decision problem of the SC is an extension of the existing price setting newsvendor problem (PSNP). It is found that the sufficient condition for the quasi-concavity of expected profit (EP) on PSNP can not ensure the quasi-concavity of EP of the SC. Then, the concavity condition of EP related to the CSR effect factor is presented in the case of uniformly distributed RDF and linear demand in price, and the concavity of EP is proven under centralized decision. For decentralized decision under manufacturer’s Stackelberg game, the manufacturer determines wholesale price and its CSR investment, and then the retailer decides the order quantity and the retail price. The standard revenue-sharing (RS) contract is found not able to coordinate the SC, so a modified RS (MRS) contract is proposed to coordinate the SC. Finally, numerical examples illustrate the validity of the theoretical analysis and the coordination effectiveness of the MRS contract via Matlab.

Keywords: Supply chain coordination; Corporate social responsibility; Random demand; Pricing; Revenue-sharing contract; 90B50 (search for similar items in EconPapers)
Date: 2018
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