Coordination and incentives in a supply chain with manufacturer quality effort

In recent years, how to improve the quality of products draws the attention of supply chain members because of the growing competition, but improving the quality means that manufacturers should invest more, so how to coordinate this two has become the focus of scholars´ study. The paper investigates the issue of motivating manufacturers to make the optimal quality effort in the two-stage supply chain with one retailer and one manufacturer when the retailer is the Stackelberg leader. We identify that when the market demand is influenced by quality effort and supply chain members make decisions respectively, the simple revenue sharing contract can´t coordinate the supply chain well, while the improved two-way revenue-cost sharing contract can effectively coordinate the supply chain and motivate the manufacturer take the optimal quality effort level to give the two the highest benefit.