An integrated vendor–buyer model with stock-dependent demand

We develop an integrated vendor–buyer model for a two-stage supply chain. The vendor manufactures the product and delivers it in a number of equal-sized batches to the buyer. The items delivered are presented to the end customers in a display area. Demand is assumed to be positively dependent on the amount of items displayed. The objective is to maximize total supply chain profit. The numerical analysis shows that buyer–vendor coordination is more profitable in situations when demand is more stock dependent. It also shows that the effect of double marginalization provides a link between the non-coordinated and the coordinated case.