Supply Chain Coordination with Sales Effort Effects and Impact of Loss Aversion on Effort Decision

A new supply contract based on sharing the sales profits as well as the cost of effort was devel- oped to coordinate the supply chain with sales effort effects. The contract coordinates the supplier’s actions with voluntary compliance; the contract is symmetric in the sense that both the supplier’s and retailer’s prof- its are linearly correlated and is more easily implemented in some situations. The impact of the retailer’s loss aversion on his effort is investigated based on the contract. After characterizing the retailer’s optimal solutions, this paper demonstrates that contrary to intuition, loss aversion weakens incentives for retailer’s sales effort and the retailer’s optimal effort decreases as the loss aversion increases.

Financing the price-setting newsvendor with sales effort

In this paper,we consider the financing issues in a supply chain where the capitalconstrained retailer should use limited funds to pay for both order and sales.The retailer decides the retail price,order quantity exante and sales effort expost,and he supports these operational activities by two financing sources:bank loan and trade credit.We illustrate that in this two-stage problem,the price-setting retailer’s equilibrium sales effort and retail price are both related to the market realization value and the retailer’s cash level.These two financing sources are both able to stimulate the retailer to promote sales.If the retailer’s cash level is reasonably high,both parties(supplier and retailer)benefit from trade credit.By contrast,if the retailer’s cash level is low,trade credit may discourage the retailer from sales promotion.Counterintuitively,our study shows that the retailer spends more on sales when the market is good than when it is bad.

DYNAMIC PRICING AND COMPENSATION ON HETEROGENEOUS SALES FORCES

In this paper, we analyze the pricing decision and the compensation strategy of a firm that relies on a heterogeneous sales force to sell its product in two periods. The sales agents＇ selling abilities are their private information and will determine the effectiveness of the agents＇ selling efforts. We introduce three compensation contract strategies, i.e. pooling, semi-separating and separating that the firm can adopt in period one and by applying principle-agent theory, derive the optimal compensation contracts and optimal price for the firm in two periods in each strategy. Compai＇ing these three contract strategies, we found that the optimal strategy for the firm depends on the discount factor. We show that the firm will surely offer separating contracts in period one for some small discount factor, and for some large discount factor pooling contract is certain to be provided in period one. However, semi-separating contracts may be considered for some mediate discount factor, and also may not appear for all discount factors in period one. Our analysis also reveals that the optimal price decreases with the discount factor when pooling contract is offered in period one and increases with the discount factor when separating contracts is offered in period one.

MANUFACTURER'S UNIFORM PRICING AND CHANNEL CHOICE WITH A RETAIL PRICE MARKUP COMMITMENT STRATEGY

The paper studies channel choice decisions in a multi-channel supply chain under a strategy where there is an ex-ante commitment made on the retail price markup. The market demand is uncertain and dependent on the price and sales efforts. The results show that in any channel structure, when making order decisions the retailer only examines the price ratio and the fluctuation size of random demand, rather than the channel cost and the retailer＇s marketing efficiency. When the retail price rises, the manufacturer is willing to increase inventory quantity for direct sales, because the manufacturer＇s profit margin is higher in direct channel. The increase in demand fluctuation only affects the degree of channel preference but doesn＇t change the manufacturer＇s channel choice. No matter in which level the price ratio is, when the sales efficiency of retail channel is not high or the demand proportion of direct channel is low, the manufacturer and the retailer will be both apt to choose a dual-channel structure. Then adding a direct channel becomes a marketing strategy, rather than a competitor of the retail channel, and helps the supply chain win more market demand.