Coordination Mechanisms for a Distribution System with One Supplier and Multiple Retailers（MS）




       We address a fundamentaltwo-echelon distributionsystemin which the sales volumesof the retailers areendogenouslydetermined on the basis of known demand functions.Specifically,thispaperstudies a distribution channel where asupplierdistributes asingleproducttoretailers,who in turn sell theproductto consumers. The demand in each retailmarket arrivescontinuouslyat a constant rate that is ageneral decreasingfunction of theretailpricein the market. We have characterized anoptimal strategy, maximizingtotalsys-temwideprofitsin a centralizedsystem.We have also shown that the sameoptimumlevelof channelwideprofitscan be achieved in a decentralizedsystem,butonlyif coordination isachieved viaperiodically charged,fixedfees, and a nontraditional discountpricingschemeunder which the discountgivento a retailer is the sum of three discountcomponentsbasedon the retailer's(i)annual salesvolume, (ii)orderquantity,and(iii)orderfrequency, respec-tively.Moreover,we show that no(traditional)discountscheme, based on orderquantitiesonly,suffices tooptimizechannelwideprofitswhen there aremultiplenonidentical retailers.Thepaperalso considers a scenario where the channel members fail to coordinate their deci-sions andprovidesnumericalexamplesthat illustrate the value of coordination. We extendour results tosettingsin which the retailers'holdingcost ratesdependon the wholesaleprice.