Supply Chain Coordination with Stock-Dependent Demand Under Incremental Quantity Discount Policy

This paper considers coordination issues in a two level (manufacturer -retailer) channel, and the manufacturer in this system offers a single product to the retailer who faces a current stock dependent demand. Our work focuses on two aspects. We will first discuss, in the manufacturer-Stackelberg game structure, how the manufacturer sets the wholesale price of the product and how the retailer in turn determines the corresponding order quantity. Based on the assumption that the information is symmetrical, the paper then presents an incremental quantity discount mechanism that would make the manufacturer to get the most profit and ultimately achieve the channel´s perfect coordination. Last, a numerical example and sensitivity analyses of the major parameter are presented to illustrate the model.