Coordination mechanism with quantity discount contract for cloud service supply chain

We mainly design a quantity discount contract to coordinate the two-stage cloud service supply chain, which consists of one application service provider (ASP) and one application infrastructure provider (AIP). The AIP supplies the computing capacity to the ASP. The ASP sells the value-added application services to the market. The market is characterized by a price-sensitive random demand. We discuss three kinds of coordination mechanism, namely, centralized mechanism, wholesale price contract and quantity discount contract. We find that although the wholesale price contract can coordinate the supply chain, the AIP can´t get a large portion of supply chain profit. We design a quantity discount contract, which can perfectly coordinate the cloud service supply chain and arbitrarily allocate the coordination profit. Otherwise, the quantity discount contract does not distort the ASP´s pricing decision, if coordinating the ASP´s ordered quantity it can also coordinate the ASP´s pricing. Furthermore, through numerical analysis, we find that the quantity discount contract improves the performance of supply chain system, which heightens the AIP´s status. The AIP turns into the active initiator of the quantity discount contract.