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a b s t r a c tThis paper deals with the problem of coordinating a vertically separated channel under a consignment contract with revenue sharing. We consider the demand of the downstream player, e.g., the retailer, being price and shelf-space sensitive. Under such a setting, the retailer decides on the revenue-sharing percentage and the slotting fee. And the upstream player, e.g., the manufacturer, decides on the retail price and the size of shelf-space. For each item sold, the retailer deducts an agreed-upon percentage from the selling price and remits the balance to the manufacturer. We model the decision-making of the two firms as a Stackelberg game, and carry out equilibrium analysis for both the centralized and decentralized regimes of the channel, with and without cooperation. In addition, a profit sharing scheme through a two-part slotting allowance is proposed, which leads to Pareto improvements among channel participants. Our analysis reveals that the noncooperative game tends to set a higher revenue-sharing percentage and lower slotting fee by the retailer, and a higher retail price and less display space by the manufacturer, which leads to a lower channel profit. The consistent bias can be perfectly rectified by the cooperative game through the proposed two-part contractual agreement.

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This study deals with the trade-in rebates offered by the manufacturer to the consumers. We investigate when and how a durable goods firm should offer a trade-in rebate to collect and recover used products, in order to achieve better price discrimination and weaken competition from third-party remanufacturers. It creates segment effect by offering different prices to different groups of customers. This study determines the optimal pricing and/or trade-in rebate, and examines the strategic choice among the three options facing the firm. We develop analytic models that incorporate key features of durable goods into model formulation, namely the deterioration rate and the recovery cost of the used goods. Our research findings include: the rebate magnitude of trade-in-to-high option increases in the deterioration rate, but decreases in the customer's willingness to trade-in and the manufacturing, recovering, and maintenance costs, and the strategic choice among the three options depends critically on the two features of the deteriorating rate and recovery cost.

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