Coordination between a supplier and a retailer in terms of profit concession for a two-stage supply chain

This paper introduces a coordination model that copes with the conflicts between a supplier and a retailer in a two-stage supply chain. In this model, the supplier aims to maximise his/her profit, while the retailer aims to maximise his/her expected profit under a stochastic demand. To solve this model, an -coordination solution to this model is introduced, which implies the supplier and the retailer both will make a same concession in their profits to cooperate with each other. Further, we show that each feasible solution to this model is an -coordination solution for a sufficiently large value , while the -optimum coordination solution gives the minimum concession for the supplier and the retailer. Besides, it is proved that the -optimum coordination solution can be obtained by solving a mathematical programming problem. At last, a numerical example and sensitivity analysis are given to show the performance of the proposed method.