Coordinating Three-Level Supply Chain with the Combination of a Quantity Discount Contract and a Buyback Contract

The purpose of this paper is to investigate the coordination problem of a three-level supply chain which consisted of a manufacturer, a distributor and a retailer. Using a quantity discount contract and a buyback contract, we derived conditions under which the three-level supply chain can be coordinated so that the maximal potential profit is realized. By adjusting the wholesale prices and the buyback rate, the profit of the supply chain can be arbitrarily divided among the manufacturer, the distributor and the retailer. The validity of the contracts is illustrated by numerical examples.