Centralized

Settings
(Wholesale price
contract)

Retailer's Price Demand=(100-5*p)

Manufacturer's cost Total supply chain profit

10 50 4 300
11 45 4 315
12 40 4 320
13 35 4 315
14 30 4 300
15 25 4 275
16 20 4 240
17 15 4 195
18 10 4 140
19 5 4 75
20 0 4 0

Decentralized
Settings
(Wholesale price
contract)

Retailer's Price Demand=(100-5*p)

manufacturer's wholesale price Manufacturer's cost

10 50 10 4
11 45 10 4
12 40 10 4
13 35 10 4
14 30 10 4
15 25 10 4
16 20 10 4
17 15 10 4
18 10 10 4
19 5 10 4
20 0 10 4
 Price that maximizing Price that maximizing
Centralized supply chain's Centralized supply
profit chain's profit
12 40

Retailer's profit Manufacturer's profit Total supply chain profit

0 300 300
45 270 315
80 240 320
105 210 315
120 180 300
125 150 275
120 120 240
105 90 195
80 60 140
45 30 75
0 0 0
 Quantity that
Price that maximizing retailer's maximizing
profit retailer's profit
15 25

350
315 320 315
300 300 300
270 275
250 240 240
200 210
195
180
Profit

150 150 140

120 125 120
100 105 105
80 90 80 75
50 60
45 45
30
0 0 0
10 11 12 13 14 15 16 17 18 19 20
Retail price

Manufacturer's profit Total supply chain profit Retailer's profit

0 0 0
10 11 12 13 14 15 16 17 18 19 20
Retail price

Manufacturer's profit Total supply chain profit Retailer's profit

Scenario 1
Fixed retail price/unit 10
wholesale price/unit 5
Salvage price/unit 0
Production cost/unit 1
Mean of the demand 1000
standard deviation of of the demand 300
Centralized supply chain
CSL (F(q)={(p-c)/(p-v)}) 0.9
Normsinv of CSL (normsinv{(p-c)/(p- 1.2816
v)})
Optimal order quantity=mean+ 1384.48
(SD*Normsinv of CSL)

Maximum profit for the centaralized 12460.32

supply chain (p-c)*qc
Decentralized supply chain
CSL (F(q)={(p-w)/(p-v)}) 0.5
Normsinv of CSL(normsinv{(p-w)/(p- 0
v)})
Optimal order quantity{mean+ 1000
(SD*Normsinv of CSL)}

Retailer's profit (p-w)*qdc 5000

Manufacturer's profit (w-c)*qdc 4000
Total profit of the decentralized supply 9000
chain (p-c)*qdc
Difference in profits 3460.32
Scenario 2 Scenario 3
Fixed retail price/unit 10 Fixed retail price/unit
wholesale price/unit 5 wholesale price/unit
Salvage price/unit 0.5 Salvage price/unit
Production cost/unit 1 Production cost/unit
Mean of the demand 1000 Mean of the demand
standard deviation of of the demand 300 standard deviation of of the dema
Centralized supply chain Centralized supply chain
CSL (F(q)={(p-c)/(p-v)}) 0.9474 CSL (F(q)={(p-c)/(p-v)})
Normsinv of CSL (normsinv{(p-c)/(p- 1.6202 Normsinv of CSL (normsinv{(p-c)/
v)})
Optimal order quantity=mean+ 1486.06 Optimal order quantity=mean+(SD
(SD*Normsinv of CSL)

Maximum profit for the centaralized 13374.54 Maximum profit for the centaralize
supply chain (p-c)*qc
Decentralized supply chain Decentralized supply chain
CSL (F(q)={(p-w)/(p-v)}) 0.53 CSL (F(q)={(p-w)/(p-v)})
Normsinv of CSL(normsinv{(p-w)/(p- 0.08 Normsinv of CSL(normsinv{(p-w)/
v)})
Optimal order quantity{mean+ 1024 Optimal order quantity{mean+(SD
(SD*Normsinv of CSL)}

Retailer's profit (p-w)*qdc 5120 Retailer's profit (p-w)*qdc

Manufacturer's profit (w-c)*qdc 4096 Manufacturer's profit (w-c)*qdc
Total profit of the decentralized supply 9216 Total profit of the decentralized s
chain (p-c)*qdc
Difference in profits 4158.54 Difference in profits
 10
5
2
1
1000
300

1.125
Err:502

Err:502

Err:502

0.63
0.33

1099

5495
4396
9891

Err:502
Scenario 1
Fixed retail price/unit 10
wholesale price/unit 5
Salvage price/unit 0
Buyback price/unit 0.5
Production cost/unit 1
Mean of the demand 1000
standard deviation of of the demand 300

Decentralized supply chain

CSL (F(q)={(p-w)/(p-b)}) 0.53
Normsinv of 0.08
CSL(normsinv{(p-w)/(p-b)})
Optimal order quantity under 1024
buyback contract{mean+
(SD*Normsinv of CSL)}

(p-w) 5
(p-v) 10
(p-c) 9
coordinating buyback price 4.44444444444445
Scenario 2
Fixed retail price/unit 10
wholesale price/unit 5
Salvage price/unit 0.4
Buyback price/unit 0.5
Production cost/unit 1
Mean of the demand 1000
standard deviation of of the 300
demand
Decentralized supply chain
CSL (F(q)={(p-w)/(p-b)}) 0.53
Normsinv of 0.08
CSL(normsinv{(p-w)/(p-b)})
Optimal order quantity under 1024
buyback contract{mean+
(SD*Normsinv of CSL)}

(p-w) 5
(p-v) 9.6
(p-c) 9
coordinating buyback price 4.66666666666667
Scenario 1
Fixed retail price/unit 10
wholesale price/unit 5
Salvage price/unit 0
Production cost/unit 1
Discount 4.5
Mean of the demand 1000
standard deviation of of 300
the demand
fraction of Retailer's 0.45
revenue shares with
Manfacturer
Revenue Sharing 0.55
parameter-fraction of
Retailer's revenue he
keeps with himself
(theta)
CSL (F(q)={(theta*p- 0.909
(w-d))/theta*(p-v)})
Normsinv of 1.33
CSL(normsinv{(theta*p-
(w-d))/theta*(p-v)})
Optimal order quantity 1399
under revenue sharing
contract{mean+
(SD*Normsinv of
CSL)}
Coordinating revenue 0.5
sharing parameter(w-d)/
c
Scenario 1
Fixed retail price/unit 10
wholesale price/unit 5
Salvage price/unit 0.5
Production cost/unit 1
Discount 4.5
Mean of the demand 1000
standard deviation of of the demand 300

fraction of Retailer's revenue shares with 0.45

Manfacturer

Revenue Sharing parameter-fraction of 0.55

Retailer's revenue he keeps with himself
(theta)

CSL (F(q)={(theta*p-(w-d))/theta*(p- 0.957

v)})
Normsinv of CSL(normsinv{(theta*p-(w- 1.72
d))/theta*(p-v)})

Optimal order quantity under revenue 1516

sharing contract{mean+(SD*Normsinv of
CSL)}

Coordinating revenue sharing 0.5

parameter(w-d)/ c
Retailer
Manufactuerer