Report Number

2011-001

Abstract

We consider a variant of the wholesale price-only contract in a simple supply chain consisting of one manufacturer and one retailer, where the manufacturer is the Stackelberg leader and the retailer is the follower. In our model, the manufacturer decides the wholesale price first, and then the retailer chooses his order quantity before the stochastic demand is realized but postpones his pricing decision until after the realization of demand. The existing literature on this model has established structural results under restrictive conditions. In this study, we show that the optimal policies are unique and profit functions are unimodal for both manufacturer and retailer under mild conditions on the demand distribution. We consider both multiplicative and additive demand models. Insights are developed from analyzing the structures of the optimal policies. Our results contribute as well as generalize the existing results in the literature.

Keywords

wholesale price-only contract, price-postponement

Date of this Version

2011

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