PRICE AND SERVICE-LEVEL DECISIONS AND CHANNEL COORDINATION UNDER DISRUPTION OF SOCIAL WELFARE RESPONSIBILITY DEGREE

Abstract

Some special events such as adjustments of executives can cause the disruption of social welfare responsibility degree (SWRD for short) of firm’s decision-maker, which may further influence the price and service-level decisions and supply chain coordination. However, in the field of supply chain management, there are very limited studies on SWRD disruption. Facing potential SWRD disruption, we develop game-theoretic models to investigate the price and service-level decisions and channel coordination in manufacturer-led and retailer-led supply chains. We find that: (1) if SWRD changes greatly, then a higher SWRD decreases retail price and raises service level; otherwise, these decisions are robust to its disruption; (2) after SWRD disruption, while the manufacturer-led supply chain can be coordinated by all-unit wholesale quantity discount contract with fixed service level and capacitated linear pricing contract with fixed service level, the retailer-led supply chain can be coordinated by revenue-responsibility-cost-sharing contract with extra side payment; and win-win situation for channel members can be achieved under coordination mechanisms; and (3) numerical results imply that the change in channel power structure may invert the effects of SWRD disruption on channel members’ profits; and a higher SWRD may increase the win-win opportunity (cooperation) for channel members under coordination mechanisms. Moreover, with the consideration of extra demand disruptions caused by SWRD disruption, we surprisingly observe that if SWRD changes greatly, then a higher SWRD may raise retail price and service level; otherwise, only service level is robust to its disruption.