| Abstract: | This paper deals with an integrated single‐manufacturer single‐retailer supply chain model for a single item. The market demand is assumed to be dependent on both the on‐hand stock and price, and the manufacturer and the retailer are in an agreement of lot‐for‐lot policy. The proposed model is developed under the contract that the retailer offers the manufacturer a percentage of revenue (s)he generates by selling a lot. We determine optimal policies for both the centralized and decentralized coordination systems. A comparison of these policies is made with a numerical example. Sensitivity analysis is performed to examine the stability of the solution. |
