Contracting Fashion Products Supply Chains When Demand Is Dependent on Price and Sales Effort

Abstract

This paper investigates optimal decisions in a two-stage fashion product supply chain under two specified contracts: revenue-sharing contract and wholesale price contract, where demand is dependent on retailing price and sales effort level. Optimal decisions and related profits are analyzed and further compared among the cases where the effort investment fee is determined and undertaken either by the retailer or the manufacturer. Results reveal that if the retailer determines the effort investment level, she would be better off under the wholesale price contract and would invest more effort. However, if the manufacturer determines the effort level, he prefers to the revenue-sharing contract most likely if both parties agree on consignment.