Research Article
Optimal Transaction Model of a Supply Chain in which Supplier Does a Role of Mediator
Chung-Ang University
Published: January 2018 · Vol. 47, No. 2 · pp. 505-520
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Abstract
This study deals with a supply chain which has a monopolistic retailor and a supplier when the demand pattern follows a normal distribution for a given retail price, in which the retailor takes a role as an intermediary or a mediator whose role is to coordinate and mediate the sales process between a supplier and retail customers. So this supply chain applies a different transaction scheme from the traditional one which might cause the issue of double marginalization problem between suppliers and retailors. The objective of the study is not only to find the optimal retail pricing scheme which maximizes the profit through the entire supply chain but also simultaneously to guarantee a certain level of incentive compatibility for both of the firms to participate in the transaction. Also we want to understand the reason why the firms in such a transaction environment tend to want to adopt a fixed amount of transaction fee in addition to a sliding scale fee proportionally depending on retail sales volume, which is called the two-part tariff scheme. Our analysis demonstrates that the optimal transaction stems from the scheme based on the marginal cost ratio, which is the ratio of each firm’s marginal cost in total marginal costs the whole supply chain spends as follows: The first step of the optimal policy requires that each firm takes its share from the retail sales revenue proportional to its marginal cost ratio. It appears to be that it is unavoidable for them to end up with a less amount of retail sales revenue if they apply a different ratio. The second step is to adopt a fixed amount transaction fee reflecting each firm's relative bargaining power.
