| This dissertation, consisting of three essays, seeks to understand how contractual agreements between firms affect operational decisions in a supply chain. Each essay models a decentralized channel facing stochastic demand, where a risk-neutral manufacturer sells a single product to a risk-neutral retailer. Each model assumes two decisions, an inventory decision made before demand uncertainty is resolved, and an effort or pricing decision.; In the basic model of Chapter 2, the retailer chooses promotional effort after demand uncertainty is resolved. If wholesale price exceeds marginal production cost, the retailer orders fewer than the joint profit-maximizing inventories. But, if the manufacturer attempts to coordinate inventories by buying back unsold units, the retailer's promotional incentives are dulled. The essay shows that buy-backs adversely affect supply chain profits, and higher buy-back prices imply lower profits. Also, while buy-backs alone can not achieve the vertically integrated channel profit, promotional cost-sharing agreements, unilateral markdown allowances, or additional constraints on the buy-back, may help achieve coordination.; In Chapter 3, the retailer stocks the manufacturer's product and a partially substitutable “generic” product. This essay investigates the impact that lead time reduction by the manufacturer has on the payoffs of the two firms, and on inventories of the products. The results show that the retailer always benefits from lead time reduction, but the manufacturer may make lower profits, and the inventory of the generic product may increase. This implies that desirable innovations, like lead time reduction, may not be made without appropriate contractual agreements designed.; Chapter 4 analyzes a supply chain facing a stochastic; downward sloping, demand curve. The manufacturer can deliver goods both before and after demand realization, with the latter option being expensive. The retailer chooses price ex post. Retailer-managed-inventory and vendor-managed-inventory contracts are analyzed, to compare their impact on supply chain efficiency and the distribution of profits. This allows the analysis of two types of double marginalization effects that occur, one caused by demand uncertainty and the other caused by price-sensitivity. All of the results are shown using a very general lattice programming framework with minimal assumptions about demand distribution and price sensitivity. |
