The Problem of Supply Chain Profit Maximization Using Sales Rebate Contract

Contributions to Game Theory and Management. 2019. Vol. 12. P. 70–99.

Berezinets I., Meshkova M., Nikolchenko N.

The paper considers the problem of supply chain profit maximization using the sales rebate contract. The problem solving is proposed for the two-echelon supply chain model with risk-neutral partners and the assumption of triangular distributed demand. It was shown that the sales rebate contract is not coordinating, as it does not provide the individual rationality for the supplier. The authors considered conditional coordination of the supply chain with sales-rebate contract, when the expected profits of the supply chain and the retailer reach their maximum, and the supplier’s expected profit is greater than for the case of the wholesale price contract. It can be argued that the sales-rebate contract implementation under certain conditions is beneficial for both partners involved in the supply chain and provides the maximum of the supply chain expected profit. It was approved that the problem of supply chain profit maximization can be solved using the sales rebate contract.

Keywords: supply chain, profit, coordinating contract, sales rebate contract