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Contract design and order decision of online retailer's sharing surplus demand with offline retailer

Author

Listed:
  • Jianjun Yu
  • Liqian Wang
  • Yongwu Zhou
  • Hongkai Fang

Abstract

With the gradual slowdown in the growth rate of e-commerce transaction volume, some online retailers choose to cooperate with offline retailers to jointly explore a profit increment path and achieve a new round of profits. In this cooperation mode, the online retailer will share his surplus demand with the offline retailer to complete. This paper designs two kinds of contracts to distribute the cooperative income. In contract 1, the online retailer will return a certain proportion of the cooperative profit to the offline retailer. While in contract 2, the online retailer will provide certain subsidies to the offline retailer according to his order quantity. The results show that contract 1 is dominant when the offline retailer is faced with high demand or slow-volatile demand. However, contract 2 outperforms in the contrary situation. Through sensitivity analysis, it is found that changing the cost or price of the offline retailer can improve the performance of both retailers.

Suggested Citation

  • Jianjun Yu & Liqian Wang & Yongwu Zhou & Hongkai Fang, 2024. "Contract design and order decision of online retailer's sharing surplus demand with offline retailer," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 47(2), pages 143-159.
  • Handle: RePEc:ids:ijisen:v:47:y:2024:i:2:p:143-159
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