Supply chain coordination in time and price sensitive market with delivery time investment and compensation

This paper studies a supply chain consisting of a supplier and a retailer facing price and lead time sensitive demands. A Stackelberg game is constructed to analyze the price and compensation decisions by the supplier as the leader, the wholesale price and the investment decisions by retailer as the follower. It also analyzes how do the price sensitivity factor, delivery time sensitivity factor, and investment efficiency factor influence the delivery time investment and compensation. The results show that: when supplier provides compensation, it will promote online retailer's delivery time investment and will let both supplier and retailer meet their optimal profit; while centralized decision is better than the decentralized decision. At last, the two-part tariff is proved that it can coordinate the supply chain.