Supply Chain Coordination Facing Boundedly Rational Strategic Customers

It is well known that strategic customers significantly impact retailers’ order quantity, therefore affecting supply chain coordination. Recently, many studies have shown that strategic customers are boundedly rational, i.e., they cannot precisely know their environments, and their decisions may deviate from reality. Therefore, this article studies supply chain coordination facing boundedly rational strategic customers. We first consider wholesale price contract and markdown money contract. Then, we show that the markdown money contract can coordinate the supply chain while the wholesale price contract cannot, and consumer's high rationality level may alleviate the double marginalization effect. We further study the supply chain coordination problem when adopting the QR strategy, which is widely used in industries with short-life products. Interestingly, wholesale price contracts can coordinate the supply chain under the QR strategy, contrary to the well-known conclusion that wholesale price contracts usually do not coordinate the supply chain. Markdown money contract can also coordinate the supply chain. Moreover, the consumer's rationality level greatly impacts the coordinative contract parameter setting. At last, we further study the supply chain coordination under quantity discount contract and revenue sharing contract, and find that these contracts can also coordinate the supply chain under certain conditions.