A Comparison of the Buyback, Rebate and Quantity Flexible Contracts in Multi Echelons Supply Chains with Probabilistic Demand and Game Theory Approach

Abstract

Companies employ several forms of cooperation to reach success in the global competitive market. Coordination models seek to find the practical solution to encourage supply chain members to make decisions to improve overall profit. Note that, cooperation contracts are useful tools to make supply chain members behave coherently and coordinately with each other in order to gain SC's profit as final purpose. This paper aims to determine the most appropriate contract that can make cooperation between SC levels. In this case supply chains and cooperation contracts were reviewed and as a result of this study. Afterwards, a two echelons SC and mentioned contracts in the title chose are investigated. By considering the game theory approach, static games by complete information and Nash equilibrium as a solving method and probabilistic demand of consumers, initial profit function models of SC echelons were designed and subsequently, the secondary models redesigned with the consideration of the specific circumstances of each contract. Then, some experiments were designed by MINITAB software and solved by EXCEL and LINGO software. Eventually, by analyzing outputs, rebate contract is determined as the most appropriate way of establishing cooperation among the SC levels.

Keywords

• two echelons supply chain
• buyback contract
• rebate contract
• quantity flexibility contract
• game theory