Model of Supply Chain Incentive Penalty Contract Based on the Linear Quality Demand

As quality management being of great importance on many companies increasingly, quality coordination has become the new one of supply chain coordination. When demand is in the linear correlation with quality in supply chain member, the traditional wholesale price has not coordinated the supply chain. In this paper, the incentive penalty contract is put forward under the linear quality demand and the coordination can be achieved through it. Also the decision variables such as price, quantity and quality are obtained.