Cost-based pricing model with value-added tax and corporate income tax for a supply chain network

This article aims to propose the short-term cost-based pricing method of supply chain network with the consideration of value-added tax (VAT) and corporate income tax. First, the average cost function of each business unit in supply chain network is given, and the average cost function is taken as the monotone mapping in n-dimensional space. According to Kantorovich theorem, the existence and uniqueness of equilibrium point where the cost equals the income is discussed. When the demand function satisfies certain conditions, there generally exist many equilibrium points for cost-based pricing. Moreover, the iteration method for finding one of the equilibrium solutions is given. Then, tax burden of producers and consumers is described and illustrated with an example.