A linear demand-quality model of incentive and penalty contract in supply chain

Abstract

As quality management becomes more and more important to companies, quality coordination has been a new supply chain coordination. When there is a linear correlation between demand and quality, the traditional wholesale price will not coordinate the supply chain. In this paper, the incentive-penalty contract is put forward under the linear demand, so the coordination can be achieved. The decision variables, such as price, quantity, and quality, are obtained.