Coordinating pricing and advertising decisions for supply chain under consignment contract in the dynamic setting

Abstract

In this paper, via the differential game method, the problems of the pricing and advertising decision are investigated by considering the effect of number of the platform users on demand. In addition, a novel contract is developed to coordinate the supply chain. Firstly, the optimal strategies of the pricing and advertising are given in the decentralized and centralized scenarios by applying the differential game theory. Also, the comparison analysis concerning on the optimal strategies is proposed in two decision scenarios. It is shown that the centralized scenario could lead to the higher advertising effort of each member and a lower retail price. Next, we construct the state-dependent contract with hope to coordinate the supply chain and then improve the performance of the supply chain. Finally, a numerical example is provided to illustrate the impacts of the price-elasticity index of demand and the effectiveness of the number of retailer’s platform users onto the feasible region of the corresponding contract.