Title: Contract design and order decision of online retailer's sharing surplus demand with offline retailer

Authors: Jianjun Yu; Liqian Wang; Yongwu Zhou; Hongkai Fang

Addresses: School of Business Administration, South China University of Technology, China ' School of Business Administration, South China University of Technology, China ' School of Business Administration, South China University of Technology, China ' School of Business Administration, South China University of Technology, China

Abstract: With the gradual slowdown in the growth rate of e-commerce transaction volume, some online retailers choose to cooperate with offline retailers to jointly explore a profit increment path and achieve a new round of profits. In this cooperation mode, the online retailer will share his surplus demand with the offline retailer to complete. This paper designs two kinds of contracts to distribute the cooperative income. In contract 1, the online retailer will return a certain proportion of the cooperative profit to the offline retailer. While in contract 2, the online retailer will provide certain subsidies to the offline retailer according to his order quantity. The results show that contract 1 is dominant when the offline retailer is faced with high demand or slow-volatile demand. However, contract 2 outperforms in the contrary situation. Through sensitivity analysis, it is found that changing the cost or price of the offline retailer can improve the performance of both retailers.

Keywords: random demand; Stackelberg game; transshipment; revenue sharing contract; ordering decision.

DOI: 10.1504/IJISE.2024.138896

International Journal of Industrial and Systems Engineering, 2024 Vol.47 No.2, pp.143 - 159

Received: 23 Dec 2021
Accepted: 29 May 2022
Published online: 03 Jun 2024 *

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