Supply Chain Coordination under Revenue-Sharing Contract with Sales Effort Effect

Consider a two level supply chain consisting of a supplier and a retailer which faces a stochastic demand influenced by retailer's sales effort. Before the sales season, the retailer has to decide both the ordering quantity and the level of the sales promotion at the same time. We first analyze the reason why the traditional revenue-sharing contract can't coordination the decentralized supply chain, then we provide a new contract which is a combined contract about sales cost sharing based on revenue-sharing. Proved that the combine contract can coordination the supply chain when the way of the sales effort effect is in product, at last we do a numerical simulation.