A dynamic model of the combined contract for a short-life-cycle product

Contract is a mechanism to realize the performance improvement of supply chain system or to achieve the perfect coordination of supply chain channel. This paper deals with a coordination issue of selling channel for a short-life-cycle product. Firstly, we design a new-type contract combined return policy with markdown money according to the practices, under which some companies sell their products with different marketing policies in different selling periods, and we depict this case with a two-period dynamic model. Then, the necessary condition to achieve the channel coordination with this combined contract is derived, and given the scheme to allocate the coordination profit we develop the generalized method to find the optimal contract parameters. Lastly, with analysis and examples, we can conclude that: (1) to achieve coordination with the single contract in literatures for two-period selling depends on the demand distribution and the cost structure of system, but the combined contract modeled by us only depends on the cost structure of system, so the combined contract is more operable in practice; (2) this combined contract can ensure the channel coordination and arbitrarily allocate the coordination profit; (3) the combined contract is generalized and several classical contracts are its special examples.