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Title: Supply chain coordination and decisions under effort-dependent demand and customer balking behaviour

Authors: Guang-Dong Liu; Tian-Jian Yang; Xue-Mei Zhang

Addresses: College of Economics Management, Beijing University of Posts and Telecommunications, Beijing 100876, China; Laboratory of Anhui Province, College of Business and Key Logistics, Fuyang Normal University, Fuyang, Anhui 236037, China ' College of Economics Management, Beijing University of Posts and Telecommunications, Beijing 100876, China ' Logistics Laboratory of Anhui Province, College of Business and Key, Fuyang Normal University, Fuyang, Anhui 236037, China

Abstract: The paper explores supply chain coordination under a sales effort-dependent demand and customer balking scenario and analyses the impacts of revenue- and cost-sharing contracts on the decisions of supply chain members. This paper subsequently develops a two-echelon supply chain consisting of one supplier and one retailer and examines two models that incorporate customer balking and sales efforts: in one model, the retailer offers a revenue sharing-only contract, and in the other model, the retailer and the supplier bargain on the revenue and cost-sharing contract. The results show that the revenue- and cost-sharing contract can coordinate the decentralised supply chain better than it can coordinate a centralised supply chain and that the effects of customer balking on the supply chain are clear; when customer balking occurs, the probability of a sale occurring can increase the profit of the supply chain, while the threshold of inventory and the sales effort can improve the marketing demand.

Keywords: revenue- and cost-sharing contract; customer balking behaviour; newsvendor model; Stackelberg game; effort-dependent demand.

DOI: 10.1504/IJISE.2020.104317

International Journal of Industrial and Systems Engineering, 2020 Vol.34 No.1, pp.84 - 106

Received: 15 Dec 2017
Accepted: 05 May 2018

Published online: 20 Dec 2019 *

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