Title: Supply chain coordination with multiple retailers and nonlinear production costs

Authors: Yigal Gerchak; Gilad Schwartz

Addresses: Department of Industrial Engineering, Tel-Aviv University, Tel-Aviv, Israel ' Department of Industrial Engineering, Tel-Aviv University, Tel-Aviv, Israel

Abstract: We consider coordination with multiple retailers when supplier's production costs are nonlinear. Microeconomics typically assumes increasing marginal production costs (i.e., convex production costs). The nonlinearity of the production costs introduces indirect dependence among the retailers, as the order quantity of one influences the cost of producing the others' lots. We consider a fixed retail price scenario, as well as price-dependent linear additive and iso-elastic demands. We explore these scenarios under wholesale-price-only contract, as well as revenue sharing contract.

Keywords: coordination; nonlinear costs; multiple retailers.

DOI: 10.1504/IJOR.2018.092016

International Journal of Operational Research, 2018 Vol.32 No.2, pp.251 - 265

Received: 11 Jun 2015
Accepted: 25 Jul 2015
Published online: 30 May 2018 *

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