Study on coordination mechanism for Pareto improvement between manufacturer and retailer in supply chain (ID: 3-040)

Coordination mechanism plays an important role in supply chain (SC), which can make the profits of members reach Pareto improvement, and then the SC performance is improved. However, the comparisons of the performance of different coordination mechanisms are studied seldom. To solve above limitation, considering of price discount and cooperation, four coordination mechanisms, i.e. `no discount & non-cooperation' (ND&NC), `no discount & cooperation' (ND&C), `discount & non-cooperation' (D&NC), `discount & cooperation' (D&C), are given in the paper. The models under different coordination mechanisms are set up and the results show that the effects of offering price discount are remarkable. Comparing with the above four coordination mechanisms, the optimal coordination mechanism is gotten, i.e. centralized coordination with price discount and cooperation. Because the manufacturer sacrifices his interests, the cooperative profit should be reallocated between the manufacturer, and the retailer to compensate the manufacturer's losses. Then according to Nash negotiation model, coordination scheme of cooperative profit is given. The simulated results indicate that this coordination scheme can realize the Pareto improvement of the manufacturer's and the retailer's profit. It is concluded that the coordination scheme of cooperative profit can ensure cooperation to self-implement.