Supply chain coordination through rebate induced contracts

In this paper three different types of rebate induced contract namely direct-rebate and revenue sharing contract; downward direct rebate contract; direct-rebate and effort sharing contract are proposed for supply chain coordination perspective. Effectiveness and flexibility of proposed contracts under linear and iso-elastic demand are discussed analytically. It is shown that under certain conditions both manufacturer and retailer can gain more profit by means of appropriate coordination contracts. Several important implications are derived analytically to point out relationship among characteristically different contracts. Results are illustrated with numerical examples.

► Supply chain coordination under linear and iso-elastic price and effort sensitive demand.
► Revenue sharing contract coupled with rebate as coordination mechanism.
► The downward direct rebate (DDR) coordination mechanism.
► The direct rebate and effort sharing coordination mechanism.
► Sensitivity of coordination mechanisms with respect to demand pattern.