Pricing and ordering strategies in a two-echelon supply chain under price discount policy: a Stackelberg game approach

Supply chain management coordinates different strategies for the production system. The manufacturer requires some incentive schemes to motivate the retailer to change his policy, optimal for the whole system. This paper suggests a discount mechanism by which companies can coordinate their ordering and pricing strategies throughout a supply chain model with a single manufacturer and single retailer. Also, the demand curve is iso-elastic price sensitive. Channel members have decided their selling price and order quantity jointly and independently to maximize the supply chain profit. A coordination mechanism is proposed based on quantity discounts to correlate pricing and ordering strategies simultaneously. The decentralized case is analyzed under the manufacturer-Stackelberg game approach. The result of numerical investigation shows that the suggested discount mechanism has improved the supply chain profit as well as each channel member's profit in comparison with the centralized and decentralized decisions without discount.