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Supply chain coordination and decisions under effort-dependent demand and customer balking behaviour

Author

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  • Guang-Dong Liu
  • Tian-Jian Yang
  • Xue-Mei Zhang

Abstract

The paper explores supply chain coordination under a sales effort-dependent demand and customer balking scenario and analyses the impacts of revenue- and cost-sharing contracts on the decisions of supply chain members. This paper subsequently develops a two-echelon supply chain consisting of one supplier and one retailer and examines two models that incorporate customer balking and sales efforts: in one model, the retailer offers a revenue sharing-only contract, and in the other model, the retailer and the supplier bargain on the revenue and cost-sharing contract. The results show that the revenue- and cost-sharing contract can coordinate the decentralised supply chain better than it can coordinate a centralised supply chain and that the effects of customer balking on the supply chain are clear; when customer balking occurs, the probability of a sale occurring can increase the profit of the supply chain, while the threshold of inventory and the sales effort can improve the marketing demand.

Suggested Citation

  • Guang-Dong Liu & Tian-Jian Yang & Xue-Mei Zhang, 2020. "Supply chain coordination and decisions under effort-dependent demand and customer balking behaviour," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 34(1), pages 84-106.
    • Handle: RePEc:ids:ijisen:v:34:y:2020:i:1:p:84-106
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    Cited by:

    1. Hrabec, Dušan & Kučera, Jiří & Martinek, Pavel, 2023. "Marketing effort within the newsvendor problem framework: A systematic review and extensions of demand-effort and cost-effort formulations," International Journal of Production Economics, Elsevier, vol. 257(C).

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