Abstract:
This paper considers a two-stage supply chain with one manufacturer and one retailer
for short life-cycle products in a risk-neutral setting. Retailer’s demand depends on the
product’s price and initial stock levels displayed at the store. The manufacturer’s capacity
limits the order quantity. An unbiased player determines the optimal price and quantity for
the centralized supply chain. Then, a retailer-led Stackelberg game is employed with four
decentralized settings, namely wholesale-price, markdown, revenue-sharing, and buyback
contracts. Numerical results for different contract forms show that the markdown policy
yields the highest expected profit for the retailer, over the range of stock and price sensitivity
levels. Sensitivity analysis shows that the markdown policy and revenue-sharing contracts
favor the retailer’s profits. In contrast, the buyback and wholesale-price contracts favor the
manufacturer. Also, the revenue-sharing contract results in the highest selling price and the
buyback contract with the lowest selling price.