Supply Chain Contracts Under Uncertainty of Retailer Counterfeiting

Abstract

We model a supply chain scenario in which the genuine manufacturer is uncertain whether a retailer sells counterfeits alongside authentic products. We evaluate the optimal strategies for players under wholesale price contracts and two-part tariff contracts and analyse the impact of the uncertainty of retailer counterfeiting on the manufacturer’s pricing and expected profits. Furthermore, we investigate whether the two-part tariff is more effective compared with the wholesale price contract.