Early order commitment under price-dependent demand in a supply chain

Early order commitment (EOC) is one approach to reduce the total cost of a supply chain, which means that retailers commit to purchase a fixed quantity at a fixed delivery time before demand uncertainty is resolved. In this paper, a game model is developed for a decentralized two-level supply chain consisting of one manufacturer and multiple retailers whose demands are price-dependent. The manufacturer induces retailers to practice EOC policy by giving them discounts based on EOC periods. The model investigates how the retailers set their retail prices and use EOC policy to obtain maximal profits, and how the manufacturer determines the optimal discount scheme.