Supply Chain Revenue-sharing Coordination with Sales Effort Effects

With considering reward and punishment, This paper analyzes a two stage supply chain consisting of a risk-neutral supplier and a risk-neutral vendor who faces a stochastic demand influenced by sales effort level. We demonstrate that unit production cost equals to the wholesale price when the supply chain is coordinated. Revenue sharing contract cannot coordinate the supply chain effectively without the reward and punishment mechanism when sales effort influences the product demand. Besides, we find that both reducing unit production costs and improving sales ability can improve profitability level of all parties in the supply chain.