TELKOM
NIKA Indonesia
n
Journal of
Electrical En
gineering
Vol. 12, No. 12, Decembe
r
2014, pp. 83
0
3
~ 831
1
DOI: 10.115
9
1
/telkomni
ka.
v
12i12.61
93
8303
Re
cei
v
ed Ap
ril 30, 2014; Revi
sed Septe
m
ber
12, 201
4; Acce
pted
Octob
e
r 4, 20
14
Service Cooperation Incentive Mechanism in a Dual-
channel Supply Chain under Service Differentiation
Jun Ch
en*, Ying Yang
Schoo
l of Man
agem
ent, Cho
ngq
ing Ji
aoto
n
g
Univ
ersit
y
, C
hon
gqi
ng, Ch
in
a, 4000
74
*Corres
p
o
ndi
n
g
author, e-ma
i
l
: jingm
u13
9@
163.com
A
b
st
r
a
ct
An
i
n
centiv
e mec
h
a
n
is
m ab
out
servic
e effort
pr
ovi
d
e
d
b
y
the
ma
nufac
turer in
a
du
a
l
-cha
nne
l
supp
ly cha
i
n i
s
studie
d
un
d
e
r asy
m
metric
infor
m
at
io
n.
T
he pri
n
cip
a
l-
ane
nt mode
ls
are d
e
vel
o
p
e
d
for
asymmetric inf
o
rmatio
n
an
d
symmetric
info
rmati
on, a
nd t
hen th
e o
p
ti
mal fixe
d pay
me
nt and th
e o
p
ti
ma
l
profit shari
ng
ratio are o
b
tai
ned.
In contra
st to the case under sy
mme
t
ric informatio
n
, the conclusi
o
n
i
m
p
l
ie
s th
a
t
th
e
m
a
n
u
f
a
c
tu
rer’
s p
r
o
f
i
t
d
e
c
rea
s
e
s
u
n
d
e
r
a
s
ymm
e
tri
c
in
fo
rm
a
t
io
n
,
th
e
re
ta
i
l
e
r
’
s p
r
o
f
i
t
keep
same eve
n
low
e
r service l
e
vel
is provid
ed. Thus,
the system perf
o
rmanc
e
of t
he supply c
hai
n decre
ases
.
Ke
y
w
ords
:
su
pply ch
ain, d
u
a
l
-cha
nne
l, servi
c
e differenti
a
tio
n
, incentiv
e me
chan
is
m
Copy
right
©
2014 In
stitu
t
e o
f
Ad
van
ced
En
g
i
n
eerin
g and
Scien
ce. All
rig
h
t
s reser
ve
d
.
1. Introduc
tion
With the
dev
elopme
n
t of
netwo
rk an
d
gro
w
th
of
cu
stome
r
’s pa
ssion
in n
e
twork an
d
increme
n
t of online
sho
ppi
ng orders, ch
annel
re
con
s
t
r
uctio
n
is a
measure that more a
nd m
o
re
enterp
r
i
s
e
s
choo
se to app
ly [1].
In this case, dual
chann
el su
ppl
y chain with
both the onli
ne
cha
nnel a
n
d
offline chan
nel is ge
ne
rate, which m
a
y lead to seriou
s
chan
n
e
l confli
cts.
The
previou
s
rese
arche
s
had i
ndicated that
the buy-b
a
c
k strategy [2], price comp
ensation strategy
[3], price-discount strate
gy [4], two part
s
and
p
r
omo
t
ion level co
mpen
sation
strategy [5] can
effectively alleviate cha
n
n
e
l confli
ct an
d con
d
u
c
ti
ve for achieving
sup
p
ly chai
n coo
r
din
a
tion.
But
the imp
o
rtant
rol
e
of
servi
c
e l
e
vel i
s
n
egle
c
ted.
In
rece
nt yea
r
s,
a certai
n n
u
m
ber of
ele
c
tric
busi
n
e
ss gi
a
n
t (e.g Ji
ngd
ong Mall, Su
-Nin
g ele
c
tro
n
ics, and T
a
obao
) u
s
e hi
gh-q
uality se
rvice
rathe
r
than i
n
tense p
r
ice
wa
r to gai
n co
m
petitive advanta
g
e
s
, and
floor,
LED a
nd o
t
he
r
indu
strie
s
co
nstantly incre
a
se
capital in
vestment
to improve thei
r
servi
c
e level.
All of these h
a
ve
indicated that
the comp
etition bet
wee
n
t
he e
n
terp
ris
e
s g
r
ad
ually
f
o
cu
se
s o
n
t
h
e
se
rv
ice
rat
h
er
than the
prod
uct. Enterpri
ses th
at devot
e them
selve
s
to bette
r lo
gi
stic
delivery
service,
retu
rn
or
repla
c
e
m
ent servi
c
e,
m
a
in
tenan
ce and
expe
rien
ce
servi
c
e
may
win
cu
stom
ers’ trust. A
s
t
he
resulting p
r
o
b
lems,
com
p
etition and
coope
ration
wi
th se
rvice i
n
a dual
ch
ann
el su
pply ch
ain
have dra
w
n a
ttention within
acad
emic a
n
d
busi
n
e
ss.
The intro
d
u
c
tion of online
chan
nel will
be benefi
c
ia
l to enhan
ce
the manufa
c
ture
rs’
bargi
ng
po
we
r a
nd
red
u
ce
the do
uble
m
a
rgin
al b
enefi
t, which i
s
th
e di
re
ct theo
ry that supp
orts
the rapi
d dev
elopme
n
t of electro
n
ic
com
m
erce [6
]. Beside
s the
con
v
enien
ce of o
n
line shop
pin
g
,
quality of service is an
oth
e
r fa
ctor th
at might
affect
cu
stome
r
s’
purcha
s
in
g b
ehavior [7], and
openi
ng
a di
rect
cha
nnel
might force
t
he
retaile
rs to imp
r
ove it
s se
rvice level
[8]. Co
nsi
d
e
r
ing
the significan
t
influence of
service on custome
r
pu
rchasi
ng beh
avior, existing schol
ars mainl
y
study from t
w
o
dimen
s
io
ns:
se
rvice
competiti
on a
nd se
rvice
coope
ration. About
the
se
rvice
comp
etition,
Xu et.al stud
ied the p
r
o
b
lems
of
Stackelb
erg and
Na
sh
g
a
me deci
s
io
ns wh
en
sup
p
liers
co
mpete
with re
tailers for
se
rvice [9]. Si
milarly, assumi
n
g
the
co
sts of
se
rvice
provided
by traditional
retaile
rs a
r
e
private inform
ations
, Mu
kh
opad
hyay respective
ly stud
ied the optim
al
deci
s
io
n for
service
co
mpe
t
ition in a mu
lti-cha
nnel
su
pply ch
ain un
der info
rmati
on shari
ng a
n
d
informatio
n u
n
-sha
ring [10
]. Chen et al.
formul
ated
a
model of ch
annel
sele
cti
on of cu
stom
er
Based
on
se
rvice level h
a
ve effect o
n
d
e
mand
[11]. Che
n
an
d Liu
studie
d
the
o
p
timal de
ci
sio
n
s
for the com
p
etition of sup
p
ly chain me
mbers w
hen t
here a
r
e diffe
rentiated
se
rvice
s
. They found
that the
servi
c
e
com
petitio
n ma
ke
s the
sup
p
ly c
hain
with d
ual-ch
a
nnel
sup
e
ri
or than th
e si
n
g
le
cha
nnel [12]
. Sun estab
lishe
d a se
rvice co
m
peti
t
ion model, whe
r
e custo
m
ers’ ch
ann
el
prefe
r
en
ce is consi
d
e
r
ed. The
study fo
und there are
service disc
rimination in supply chai
n a
fter
Evaluation Warning : The document was created with Spire.PDF for Python.
ISSN: 23
02-4
046
TELKOM
NI
KA
Vol. 12, No. 12, Decem
ber 20
14 : 8303 – 83
11
8304
addin
g
a dire
ct cha
nnel,
which m
a
ybe result
s in
re
d
u
ction of the
cu
stome
r
s’ o
v
erall utility and
the pe
rforma
nce
of
sup
p
ly ch
ain
syste
m
[13]. In
ad
dition, Lu
o et.
a
l stu
d
ied
the
influen
ce
on
the
servi
c
e comp
etition and the profit of supply
chain
when onlin
e chann
el provi
des value
-
a
d
ded
servi
c
e [14]. Dan studi
ed the reta
ilers’ o
p
tima
l service and pri
c
ing
strategy un
d
e
r
non
coo
peration in dual
-ch
annel supply
chai
n [15
]. Variou
s de
ci
si
on schem
es
unde
r the se
rvice
comp
etition a
r
e co
ndu
cive
to improve the perfo
rm
a
n
c
e of sup
p
ly chai
n, while the loss of th
e
system effici
ency is
still large.
Therefore, some
schol
ars turn to
study the optimal deci
s
ion
under
the se
rvice
coope
ration i
n
a dual-ch
a
n
nel su
pply
ch
ain. For exa
m
ple, Xiao st
udied the
pri
c
ing
strategy in a
dual-cha
nne
l supply chai
n unde
r se
rv
ice coop
erati
on [16]. Luo
et al. build a
mech
ani
sm f
o
r
coo
r
din
a
ting
sup
p
ly ch
ain, which
ba
sed
on
su
ppli
e
rs an
d retail
ers to
sha
r
e t
h
e
co
st of se
rvice
s
[17]. Kong et.al stu
d
i
ed the
imp
a
c
t of differen
t
service cost on the pri
c
i
n
g
strategy of m
anufa
c
ture
rs and retail
ers
unde
r se
rvice
coop
eratio
n [18].
Viewing from
the above l
i
teratures, m
o
st of
the e
x
isting re
sea
r
ch
es th
at re
lated to
servi
c
e i
n
d
ual-cha
nnel
sup
p
ly chain
are
from
the p
e
rspe
cti
v
e of service competitio
n.
Re
sea
r
che
s
t
hat related
to
se
rvice
coo
peratio
n
a
r
e
grad
ually in
-depth, a
nd
m
o
st of
them
are
s
t
udied under information s
y
mmetry. In fac
t,
there
are n
o
line
a
r
correlatio
n
s
bet
wee
n
the
increme
n
t of
servi
c
e
cost
and th
e im
provement
of
service
level.
And the
moti
vation to fu
rthe
r
increa
se
the
investment
of
se
rvic
e
co
st is very
we
ak for th
e
retail
ers,
e
s
pe
ciall
y
after that
the
servi
c
e l
e
vel rea
c
h
e
s
a certain l
e
vel. Ho
wever,
co
nsum
ers
req
u
ire
a mo
stly perfe
ct level
of
servi
c
e
s
, whi
c
h ma
ke
s the manufa
c
turer to motiva
te the retailer to improve its servi
c
e le
vel
whe
n
facin
g
with fierce co
mpetition. He
nce, co
n
s
ide
r
ing the co
op
eration m
ode
l of service t
hat
manufa
c
turers e
n
tru
s
t all
the service o
f
netwo
rk
ch
annel to
reta
ilers to fulfill, we
study th
e
optimal incen
t
ive strategy of manufactu
rers to moti
vate retailers to
provide hig
h
servi
c
e level for
cu
stome
r
s of
netwo
rk
cha
n
nel and tra
d
itional retail
ch
annel.
2. Model Des
c
ription
We
con
s
id
er a dual
-chan
nel supply
chain
comp
osed of on
e m
anufa
c
ture
r a
nd on
e
retaile
r, and
the ma
nufa
c
ture
r i
s
the
leade
r. Th
e
manufa
c
tu
rer
sale
s it
s
prod
uct
s
to
end
cu
st
ome
r
s
di
rect
ly
at
p
r
ic
e
d
p
. The
retail
er
buys the
produ
cts from the
ma
n
u
facturer at
whol
esale pri
c
e
w
and then
sales the
m
to cu
stome
r
s at
retail pri
c
e
r
p
, where
r
wp
. Since t
h
e
r
e
ta
iler
ha
s th
e
loc
a
tion
ad
va
n
t
a
g
e
th
at it c
a
n fa
ce t
he
cu
stome
r
s dire
ctly, in
o
r
de
r to i
m
pro
v
e
online
ch
ann
el efficien
cy
and
cu
stom
er
satisfa
c
tio
n
and
effecti
v
ely integrat
e su
pply ch
ain
resou
r
ces, th
e manufa
c
tu
re entrust
s el
ectro
n
ic
chan
nel service (e.g. return a
nd repla
c
em
ent
servi
c
e, advertising, mail notification) to
the retaile
r to fulfill. That is,
the retailer not only provides
serv
i
c
e
r
s
to cu
stomers of t
r
a
d
itional
retail
cha
nnel, but also
provide
s
se
rvice
d
s
to cus
t
omer
s in
online chan
n
e
l. The co
st
for proving
the service
is
2
()
(
2
)
Cs
s
. The pa
ramete
r
rep
r
e
s
ent
s th
e co
st coefficient of the se
rvice
s
. The
smaller th
e val
ue of
, the greater the utility
of unit se
rvice level. Assu
ming the
service level
[0
,1
]
s
, th
e value of 0 repre
s
e
n
ts the
retaile
r
doe
s n
o
t provide
servi
c
es
and
1
repre
s
e
n
ts th
e retail
er provides
pe
rfe
c
t service.
The
manufa
c
turer forms a pri
n
cipal
-ag
ent re
lationship wi
t
h
the retailer,
in which the
manufa
c
turer is
the p
r
in
cipal
and th
e
retail
er i
s
th
e
agen
t. The
spe
c
if
i
c
p
r
o
c
e
s
s i
s
shown a
s
figure.1. De
spite
it
is
difficult for t
he ma
nufa
c
ture
r to o
b
se
rve serv
i
c
e l
e
vel of the
retaile
r, the
sale
s volu
m
e
Q
gene
rated
by the retaile
r
providin
g se
rvice can be
kno
w
n exa
c
tl
y, where
()
Qf
s
. The
prod
uctio
n
function of serv
ice level
s
is given as
()
f
s
, and there a
r
e
()
0
fs
and
()
0
fs
,
whi
c
h i
ndi
cat
ed that
imp
r
ovement
of
servi
c
e
le
vel
will
incre
a
se outp
u
t of
servi
c
e
an
d
the
increa
se i
s
d
e
crea
sing. F
o
r an
alytic si
mplicity, we
assume
()
f
sk
s
, where
k
represents the
servi
c
e outp
u
t coefficient
. Since the retaile
r
provi
des servi
c
e for both onli
ne cha
nnel
and
traditional
ch
annel, the
r
e
is
dr
kk
k
. Therefore, the sale
s volume of
manufa
c
turer and
retaile
r a
r
e
resp
ectively g
i
ven by
dd
d
Qk
s
,
rr
r
Qk
s
. The pa
ram
e
ter
r
e
pr
es
e
n
t
s
exogen
ou
s a
nd u
n
certain
sto
c
ha
stic v
a
riabl
e, su
ch
as
chan
ge
s of
con
s
um
e
r
p
r
efe
r
en
ce
or
market enviro
n
ment. Refe
renci
ng lit
erature [19] a
nd [20], there i
s
2
(0
,
)
N
. Dep
endin
g
o
n
Evaluation Warning : The document was created with Spire.PDF for Python.
TELKOM
NIKA
ISSN:
2302-4
046
Servi
c
e
Coo
p
e
ration In
cent
ive Me
cha
n
ism
in a Dual-chann
el Suppl
y Ch
ain un
de
r… (Jun
Che
n
)
8305
the sales volume the manufact
urer will
pay servi
c
e reward
(,
)
dr
tQ
Q
to the retailer in an effort t
o
maximize its
profits. Weitman [21] put
forwa
r
d
the
rationality for
usin
g linea
r contra
ct. Holm
stro
and Milrgro
m
[22] also pro
v
ed t
hat linea
r co
ntra
ct ca
n optimize
th
e sup
p
ly chai
n system. Th
ey
assume
d the
ince
ntive function
as
(,
)
(
)
dr
d
d
r
tQ
Q
p
Q
w
Q
, where
is
the fixed
payments th
at the ma
nuf
acturer pay
s to the
retail
er a
nd
(
01
) is the ratio of
p
r
ofit
sha
r
ing
p
r
ovided
by the m
anufa
c
ture
r f
o
r m
o
tivating
retaile
r to im
prove it
s
se
rvice l
e
vel. Sim
ilar
to the literature [21], we a
s
sume that manufa
c
tu
rer is a risk ne
utral and the
retailer is a
risk
aversi
on. It mean
s that ret
a
iler
can elim
inate t
he ri
sk
or the ri
sk co
ndition by ch
angin
g
the pl
an
to prote
c
t its intere
sts fro
m
dama
ge.
We al
so
assume the
r
e i
s
no cro
s
s-b
u
y
ing between
cu
st
ome
r
s.
Figure 1. Service co
ope
rat
i
on diag
ram i
n
a dual-ch
a
n
nel su
pply ch
ain
Acco
rdi
ng to the above a
ssumes, the ma
nuf
actu
re
r’s e
x
pected p
r
ofits is given by:
(,
)
(1
)
(
1
)
dd
d
r
d
r
dd
r
d
d
r
dd
r
EE
p
Q
w
Q
t
Q
Q
E
pQ
w
Q
pQ
w
Q
pS
w
S
(1)
The retail
er’
s
profits i
s
given by:
(,
)
(
,
)
rr
r
r
d
r
d
r
pQ
w
Q
t
Q
Q
C
s
s
(2)
Whe
n
the
retailer i
s
a
risk averse,
accordin
g
to lite
r
ature [21],
we
use a
b
so
lute ri
sk
aversi
on
to d
e
scrib
e
the d
egre
e
of risk aversi
on
of retailer
and
gi
ve the retail
e
r
’s
utility functio
n
as
cla
ssi
cal
con
s
tant a
b
solute ri
sk av
ersi
on fu
nctio
n
()
r
r
e
.
The p
a
ra
meter
is ri
sk
aversi
on mea
s
ureme
n
t.
It
repre
s
e
n
ts th
a
t
the retailer i
s
risk
appetit
e type
whe
n
0
and i
s
ri
sk
neutral wh
en
0
and
is
ri
sk a
v
ersio
n
w
hen
0. We a
s
sum
e
the re
al ret
u
rn
s ob
ey no
rmal
distrib
u
tion a
nd the expectation is
m
and
the variance
is
n
, namely
~(
,
)
r
Nm
n
. Therefore,
the retailer’s
expected
utility is given by:
2
()
2
()
2
()
(
)
1
2
r
r
rx
xm
n
x
mn
Ee
f
x
d
ee
d
n
e
(3)
Whe
r
e,
22
22
(,
)
(
,
)
()
(
)
2
()
(
)
2
rr
r
r
d
r
d
r
rr
d
d
r
d
r
dd
r
r
d
r
mE
E
p
Q
w
Q
t
Q
Q
C
s
s
EP
w
Q
p
Q
w
Q
s
s
kp
s
p
w
w
k
s
s
s
,
(4)
Evaluation Warning : The document was created with Spire.PDF for Python.
ISSN: 23
02-4
046
TELKOM
NI
KA
Vol. 12, No. 12, Decem
ber 20
14 : 8303 – 83
11
8306
22
2
2
2
()
(
)
rr
r
d
d
nV
p
w
w
p
(5)
The retaile
r
maximize
s t
he expe
cted
utility
function is equiva
lent to maxi
mize it
s
certai
nty equi
valent earni
n
g
s
[19]:
22
2
2
2
2
2
2
()
(
)
()
22
2
r
dd
r
r
d
r
r
r
d
d
mn
kp
s
p
w
w
k
s
s
s
p
w
w
p
(
6
)
Acco
rdi
ng to
retaine
d
ea
rn
ings, the retai
l
er
jud
ge whe
t
her a
c
cept the co
ntra
ct o
r
not. If
the ce
rtainty
equivale
nt g
a
ins
r
are l
e
ss
than the
reta
ined e
a
rni
n
g
s
0
v
, namely
0
r
v
, th
e
retailer will not accept the
contract. The retailer’
s part
icipations constraint
s
is:
22
2
2
2
2
2
0
(
)
()
(
)
()
22
2
dd
r
r
d
r
r
r
d
d
I
Rk
p
s
p
w
w
k
s
s
s
p
w
w
p
v
Faced
with any incentive
conditions, the reta
il
er will alway
s
choose
appropriate service
level
d
s
and
r
s
to maximize it
s profits. The retailer’
s in
centive compatibility constrai
nt is given
by:
,
22
2
2
2
2
2
()
()
m
a
x
(
)
(
)
(
)
22
2
dr
dd
r
r
d
r
r
r
d
d
SS
IC
p
k
s
p
w
w
ks
s
s
p
w
w
p
3. Ser
v
ice Coopera
tion Incen
tiv
es un
der Informa
t
ion Sy
mmetry
In a dual-ch
a
nnel supply
chai
n, inform
ati
on symmet
r
y mean
s the
manufa
c
ture
r, who
controls the o
n
line ch
ann
el
, knows the informatio
n
that is related to cust
omers. The inform
ation
is h
e
ld by
ret
a
ilers, which i
n
clu
d
e
s
con
s
umer pref
ere
n
ce,
se
rvice
cost a
nd
se
rvice l
e
vel. In o
r
der
to maximize
its own pro
f
its, by controlling
the fixed payment
and prof
it sh
aring
ratio the
manufa
c
turer will make th
e retailer to provide a hig
her service level for the two ch
ann
els
and
simultan
eou
sl
y ensu
r
e the
retailer
ca
n
get at least t
he retai
ned
earni
ng
s. On
the cont
rary
, if
there i
s
no i
n
formation superiority, the retailer
w
ill certainly ensure
the serv
ice
quality to improve
cu
stome
r
se
rvice
sati
sfa
c
tion in
ord
e
r to
avoi
d
dama
g
ing i
t
s retai
ned
earni
ng
s. Se
rvice
coo
peration u
nder info
rmati
on symmet
r
y make
s
s
upply
chain me
mb
ers to a
c
hiev
e a win-win.
Und
e
r information sym
m
etry, the retailer’
s se
rvice level
d
s
can
be obse
r
v
ed by
manufa
c
turers. At this poi
n
t, the incentive compat
ibilit
y con
s
traint d
oesn’t work,
and
any level
of
serv
i
c
e
s
can b
e
achieved b
y
meeting co
mpulsory co
n
t
ract of the
p
a
rtic
ip
ation constraints
I
R
.
The man
u
facturer
cho
o
se
s app
ro
priate
servi
c
e leve
l
d
s
and
r
s
, fixed
payments
an
d profit
sha
r
ing ratio
to maximize its own profit. The de
cisi
on
-makin
g mod
e
l
is given by:
,,
,
ma
x
(
1
)
(
1
)
dr
dd
d
r
ss
Ep
k
s
w
k
s
22
2
2
2
2
2
0
.
.
(
)
()
(
)
()
22
2
dd
r
r
d
r
r
r
d
d
s
tI
R
p
k
s
p
w
w
k
s
s
s
p
w
w
p
v
(7)
Acco
rdi
ng to
the d
e
ci
sion
-ma
k
ing
mod
e
l, if
we
ma
ximize the
m
anufa
c
ture
r’
s profits,
equal
sign of
the partici
pati
on co
nstr
aint
s mu
st be taken. Therefore
,
22
2
2
2
2
2
0
()
(
)
()
22
2
dd
r
r
d
r
r
r
d
d
pk
s
p
w
w
k
s
s
s
p
w
w
p
v
,
Namely
,
Evaluation Warning : The document was created with Spire.PDF for Python.
TELKOM
NIKA
ISSN:
2302-4
046
Servi
c
e
Coo
p
e
ration In
cent
ive Me
cha
n
ism
in a Dual-chann
el Suppl
y Ch
ain un
de
r… (Jun
Che
n
)
8307
22
2
2
2
2
2
0
()
(
)
()
22
2
dd
r
r
d
r
r
r
d
d
vp
k
s
p
w
w
k
s
s
s
p
w
w
p
(8)
Substituting (8) into (7
), we
obtain:
22
2
2
2
2
2
0
max
(
)
(
)
22
2
dd
d
r
r
d
r
r
r
d
d
Ev
p
k
s
p
k
s
s
s
p
w
w
p
(9)
Takin
g
the
first orde
r pa
rti
a
l de
rivatives of (9)
with res
p
ec
t to
d
s
,
r
s
and
re
spe
c
tiv
e
ly,
and letting them equal to zero. The op
timal service
levels unde
r the online chann
el and the
retail ch
ann
el
are
dd
sk
p
and
rr
sk
p
re
spe
c
tively. The manufa
c
tu
rer’
s profit sh
aring
ratio is
2
2
22
22
()
(
)
rr
d
d
r
ww
p
p
w
. Since
r
wp
, then
0
. And the
manufa
c
turer’
s
p
r
ofits will decrea
s
e
be
cau
s
e of
22
2
()
0
d
Ed
d
r
r
pp
w
w
w
,
whe
r
e
01
, then
0
.
Whe
n
the manufa
c
ture
rs can o
b
serve
the reta
ile
r’s
servi
c
e level,
in each cha
nnel the
servi
c
e l
e
vel i
s
inve
rsely proportio
nal to
the servic
e
costs an
d p
r
o
portion
al to t
he
sale
pri
c
in
g of
prod
uct
s
a
nd
has nothin
g
t
o
do
with th
e
profit sha
r
ing
ratio. In thi
s
case, th
e retail
er ju
st o
b
tain
s
the pa
rt of th
e fixed paym
ent in
the i
n
centive co
mpe
n
satio
n
an
d doe
s
not sh
a
r
e
the profits
of
online chan
n
e
l.
Subs
tituting
d
s
,
r
s
and
into (8)
and (9), we can o
b
tain th
e optimal fixed payme
nts
paid
by the
manufa
c
turer and
the
opti
m
al expe
ct
ed
profit
s of m
a
nufactu
re
r. T
hey are given
by:
22
2
2
2
22
2
2
0
2
2
22
2
0
()
()
(
)
22
()
22
r
dr
d
rr
r
r
d
r
dr
r
kp
p
k
p
kp
p
w
p
w
k
w
p
Ev
k
vp
p
p
w
(10)
Since th
e m
anufa
c
ture
r
can ob
se
rve t
he retailer’
s
servi
c
e l
e
vel, if
dd
sk
p
and
rr
sk
p
, the manufacture
r can forcibly ma
ke
the
retailer’
s profit less t
han its retai
ned
earni
ng
s by redu
cing fixed
payments a
s
a punishmen
t.
4. Cooper
a
ti
on Incentiv
e
Serv
ices under Asy
mmetric Informa
t
ion
The dual
-cha
nnel supply chain is a valu
e chai
n com
p
ose
d
of different stakehol
d
e
rs, in
whi
c
h the d
i
stributio
n of
information
is often
as
ymmetric
al.
Sinc
e it is diffic
u
lt for the
manufa
c
turers to ob
se
rve
the retaile
r’s
servi
c
e le
vel,
the retaile
r h
a
s mo
re info
rmation than t
he
manufa
c
turer. In ord
e
r to
o
b
tain mo
re
profits,
the retai
l
er often
con
c
eals
or misre
p
re
sent
s
som
e
importa
nt an
d relate
d info
rmation from
the manuf
a
c
t
u
re
r, su
ch a
s
the se
rvice
requireme
nts
and
servi
c
e
prefe
r
en
ce
s of
co
nsum
ers a
n
d
the serv
i
c
e
co
sts. Th
e m
anufa
c
ture
r
can’t obtain
th
e
servi
c
e i
n
formation a
c
cu
rately, whi
c
h
result i
n
co
mp
ulso
ry
me
as
u
r
es
lo
sing
it
s
ef
f
i
cacy
.
A
t
t
h
is
time, the man
u
facturer will
desi
gn a
corresp
ondi
ng in
centive m
e
a
s
ure to
motivate the
retaile
r
to
improve its
service l
e
vel. Both the parti
cipatio
n
co
nstraint and in
centive com
p
a
t
ibility constra
i
nt
play a role. T
he de
cisi
on-makin
g
mod
e
l
is reformulat
ed as:
ma
x
(
1
)
(
1
)
dd
d
r
E
pk
s
w
k
s
(11)
22
2
2
2
2
2
0
.
.
(
)
()
(
)
()
22
2
dd
r
r
d
r
r
r
d
d
s
tI
R
p
k
s
p
w
w
k
s
s
s
p
w
w
p
v
Evaluation Warning : The document was created with Spire.PDF for Python.
ISSN: 23
02-4
046
TELKOM
NI
KA
Vol. 12, No. 12, Decem
ber 20
14 : 8303 – 83
11
8308
,
22
2
2
2
2
2
()
()
m
a
x
(
)
(
)
(
)
22
2
dr
dd
r
r
d
r
r
r
d
d
SS
IC
p
k
s
p
w
w
ks
s
s
p
w
w
p
The retailer seeks the optimal service level
d
s
and
r
s
to achieve m
a
ximum profi
t
s,
according to the first-order
conditions of
the incentive compat
ibility, we
obtai
n:
0
dd
d
v
kp
s
s
,
()
0
rr
r
v
pw
w
k
s
s
.
By solving th
e above
two
equatio
n, we
can
obtai
n
th
e optimal
se
rvice level
s
p
r
ovided by
the retaile
r for network chann
el and tradition
al
ch
a
nnel und
er i
n
formatio
n a
s
ymmetry, which
respe
c
tively given as
dd
sk
p
and
()
rr
sp
w
w
k
.
Similar to the case that the information
is
symmetry, the retailer
will take the
equatio
ns
of the particip
a
tion co
nstrai
nt, so sub
s
tituting (7
),
*
d
s
and
*
r
s
into (11
)
, we can obtain:
22
22
22
2
0
22
2
2
2
()
(
)
ma
x
2
()
22
dd
rr
r
d
rr
d
d
kp
p
kp
p
w
w
p
w
w
k
Ev
pw
w
p
(12)
T
a
k
i
ng
th
e firs
t or
d
e
r
pa
r
t
ia
l d
e
r
i
vatives of (12) with res
p
ec
t to
an
d letting it
eq
ual to
zero, the optimal profit sh
a
r
ing ratio und
er asym
metri
c
inform
ation
is given by:
22
2
2
2
22
2
2
2
2
2
()
(
)
()
(
)
dr
r
dd
d
r
kp
w
w
p
w
kp
w
p
w
(13)
Viewing from
the Equation
(13
)
, whe
n
m
anufa
c
ture
rs
can’t ob
se
rve
the retaile
r’s
servi
c
e
level, the service level th
a
t
the retail
er
provide
to th
e custom
er
o
f
online
ch
an
nel i
s
p
r
op
orti
onal
with the profit sharin
g rat
i
o and inversely pro
p
o
r
tional with
service co
sts.
Whe
n
the profits
sha
r
ing
ratio i
s
improved, there m
u
st be
a corre
s
po
n
d
ing in
cre
a
se
in the servi
c
e level provid
ed
to onlin
e
cha
nnel. T
he
se
rvice level
of
retail chan
nel
is
related
to t
he
retail
pri
c
e
and
whole
s
a
l
e
price. In the
retail channel, the
custom
ers will
enjoy a
higher se
rvice level
when the difference
between the
whol
esale pri
c
e
and the
retail price is
large, and the
retail ch
annel also will
provi
d
e
highe
r servi
c
e level wh
en
the profit sharin
g rati
o is imp
r
oved.
Mean
while, t
he retail
ers’
risk
prefe
r
en
ce
s
have influen
ce on the profi
t
sharin
g rati
o of the retailer. The mo
re
con
s
ervative
the retaile
r, the lowe
r the
profit-sha
rin
g
ra
tio shared fro
m
manufa
c
turers
will be.
Subs
tituting
d
s
,
r
s
and
into (11) or (1
2), the o
p
timal
fixed payment that the retail
e
r
gain from th
e manufa
c
turer and the
optimal prof
it
s of the manufactu
re
r u
nder info
rma
t
ion
as
ymmet
r
y r
e
s
p
ec
tively ar
e:
2
2
22
22
2
0
2
22
2
2
2
2
2
2
0
22
2
2
2
2
2
22
2
2
2
2
2
22
2
2
2
2
2
()
(
)
()
(
)
22
2
2
()
(
)
()
22
(
)
(
)
()
(
)
()
22
(
)
(
)
d
r
dr
dd
r
r
d
dd
d
r
dr
r
r
r
dd
d
r
kk
vP
P
kp
w
w
p
w
k
vP
kp
w
p
w
kp
w
w
p
w
k
P
kp
w
p
w
2
(14)
Evaluation Warning : The document was created with Spire.PDF for Python.
TELKOM
NIKA
ISSN:
2302-4
046
Servi
c
e
Coo
p
e
ration In
cent
ive Me
cha
n
ism
in a Dual-chann
el Suppl
y Ch
ain un
de
r… (Jun
Che
n
)
8309
22
22
2
2
0
2
22
2
()
()
()
22
(1
)
()
(
)
(
)
22
d
d
d
r
rr
kk
Ev
p
kk
w
PP
(15)
5. Analy
s
is
Abou
t the Im
pact o
f
Diffe
r
ent Serv
ices on Coop
er
ativ
e Mechanisms
The di
stincti
on bet
wee
n
online
ch
an
nel an
d trad
itional chan
n
e
l gives
rise
to the
differen
c
e
of cu
stome
r
service
expe
ri
ence in
e
a
ch ch
ann
el. The o
n
line
cha
nnel
brin
gs
cu
stome
r
s m
o
re p
r
odu
ct informatio
n, and the
wo
rk
hours mo
re convenie
n
t and unlimited, whil
e
the traditional
chan
nel provides
cu
stome
r
s with
the lo
wer
risk, perceived experi
e
nce in
store a
n
d
without di
stri
bution. Different
se
rvice
e
x
perien
c
e i
n
the two c
han
nels
will alte
r the custom
er
purcha
s
in
g b
ehavior a
nd l
ead to the ch
ange
of dem
a
nd stru
ctu
r
e o
f
the market.
On the
pre
m
i
s
e of
se
rvice
coo
p
e
r
ation,
the
optimal
servi
c
e l
e
vel
provide
d
to t
he two
cha
nnel
s by the retailer resp
ectively
are
dd
sk
p
and
rr
sk
p
whe
n
inform
ation
symmetry an
d re
spe
c
tivel
y
are
dd
sk
p
and
()
rr
sp
w
w
k
wh
en inform
atio
n
asymmet
r
y. Acco
rdi
ng to
these, un
de
r the
co
nditi
ons
of servi
c
e co
ope
rati
on,
whethe
r the
informatio
n i
s
symmetri
c
or n
o
t, the
manufa
c
tu
re
and the
retailer
can
profit more when
the
retaile
r provid
es differe
ntiated se
rvice
s
(
dr
ss
)
for the two
cha
nnel
s.
The followi
ng
, we will furth
e
r analy
z
e whether
the inf
o
rmatio
n sym
m
etry has im
pact on
profits
of ma
nufactu
re
r, re
tailer a
nd
su
pply ch
ain sy
stem whe
n
the
ma
nufa
c
ture
r coop
erates
with
the retail
er who will
p
r
ovide
differe
n
t
iat
ed
se
rvice
s
.
The differe
nce between manufa
c
turer’
s
profits un
de
r informatio
n sy
mmetry and i
n
formatio
n asymmetry is:
22
2
22
2
2
2
2
2
(1
)
(
1
)
()
(
)
(
2
2
)
22
2
dd
d
dd
d
r
r
EE
E
k
pw
p
w
w
p
w
w
(16)
Acco
rdi
ng to
the limits that
01
,
r
wp
,
d
wp
, we know
d
E
is co
nsta
ntly
positive. The
r
efore, be
ca
u
s
e of info
rma
t
ion as
ymm
e
try the man
u
facturer
s
u
ffers
los
s
es
. Us
ing
the advantag
e of facing custome
r
directly the retailer delivers in
c
o
mplete information to the
manufa
c
turer, which m
a
ki
ng it difficult for manuf
a
c
t
u
re
r to pre
d
i
c
t market de
mand a
c
cura
tely,
thereby it is d
i
fficult to make sci
entific an
d ra
tional d
e
cision
s of pro
d
u
ction a
nd tra
n
sp
ortation.
Different
with
manufa
c
tu
re
r, the retaile
r’
s p
r
ofits
rem
a
in un
cha
nge
d
whet
her information
is symm
etric or not. Th
e
rea
s
on i
s
th
at the
retaile
r’s ce
rtainty
equivalent g
a
ins un
cha
n
ged.
However, the retailer
can still profit. Under in
form
ation asymm
e
try servi
c
e l
e
vel of the two
cha
nnel
s b
o
th are l
o
wer
than that un
der info
rm
ati
on symm
etry
, which allo
ws the
retaile
r to
obtain un
cha
nged p
r
ofits by providing
a lower se
rvice level. In other wo
rd
s, actually, th
e
retaile
r's
profi
t
s disguisedly
incr
ea
se un
der the exi
s
ting se
rvice le
vel. Becau
s
e
of the redu
ct
ion
of the manufa
c
ture
r’
s profit
s, the sup
p
ly
chai
n system’
s
profit
s also
redu
ce.
The
retaile
r’s se
rvice
costs directly in
fl
uence the
manufa
c
turer'
s p
r
ofits
und
er th
e
con
d
ition
of coope
ration. Wheth
e
r
the i
n
formatio
n is
symmetri
c
o
r
not the man
u
f
acture
r'
s p
r
of
its
will decrease with th
e increase of
serv
i
c
e cost
coeffici
ent
.
But when
information is
asymmet
r
ic, the red
u
ctio
n of servi
c
e co
sts en
able
th
e retaile
r to obtain a gre
a
ter profits sh
a
r
ing
ratio (
0
). Be
ca
use
of information a
s
ym
metry,
the m
anufa
c
ture
r l
o
se
s m
o
re
p
r
ofits (
0
E
).
Accordi
ngly
,
the manufa
c
ture
rs will
set up e
ffort
s to coll
ect mo
re inform
ation
that
the market de
mand
s.
6. Numerical
Analy
s
is
This se
ction will
verify
the impact of
se
rvice
cost
s o
n
manufa
c
turers’ p
r
ofits in
th
e ca
se
s
of informatio
n symmetry and asymm
e
try using nu
meri
cal exam
ples. Assumi
ng that a kin
d
of
Evaluation Warning : The document was created with Spire.PDF for Python.
ISSN: 23
02-4
046
TELKOM
NI
KA
Vol. 12, No. 12, Decem
ber 20
14 : 8303 – 83
11
8310
prod
uct i
s
sold th
roug
h dual cha
nnel, and
0.5
d
p
,
0.
6
r
p
0.3
w
0.1
v
,
2
2
d
,
2
1.
5
r
,
0.
5
,
0.
5
k
. Using M
a
tlab7.0 fo
r si
m
u
lation
cal
c
ul
ations,
we
ca
n get
cha
nge
s of
the manufa
c
ture
r’s p
r
ofits with differe
nt serv
ice le
vel under th
e con
d
ition
s
of information
symmetry an
d asymmet
r
y, and these are sho
w
n a
s
F
i
gure 2
-
5.
Figure 2. Manufactu
re’
s
profits unde
r
information symmetry
Figure 3. Manufactu
re’
s
profits unde
r
information asymmetry
In Figu
re 2
a
nd Fig
u
re
3,
wheth
e
r i
n
format
ion i
s
symmetric o
r
n
o
t, the man
u
facturer'
s
profits al
way
s
de
crea
se with the increa
se of
the retailer’
s service co
sts, but
unde
r inform
ation
asymmet
r
y the de
crea
se
is only
slig
htly higher
t
han that u
n
d
e
r info
rmatio
n symmet
r
y. This
confirms the
assertio
n that t
here is no
seri
ou
sly influen
ce on ma
nufactu
re
r’s
profits when
the
retailer conceals se
rvice information.
Figure 4. Service level und
er inform
ation
symmetry
Figue
w 5. Service level un
der info
rmatio
n
asymmet
r
y
Viewing from
Figure
4 an
d Figure 5, the se
rv
ice le
vel provided
by retailers to the
traditional
ch
annel i
s
al
wa
ys highe
r tha
n
that to
the dire
ct onlin
e
cha
nnel, an
d
with the in
cre
a
se
of service costs, differ
enti
a
tion
of service
l
e
vel will become
i
n
creasingly obvious, especi
ally in
the ca
se of in
formation a
s
y
mmetry.
Evaluation Warning : The document was created with Spire.PDF for Python.
TELKOM
NIKA
ISSN:
2302-4
046
Servi
c
e
Coo
p
e
ration In
cent
ive Me
cha
n
ism
in a Dual-chann
el Suppl
y Ch
ain un
de
r… (Jun
Che
n
)
8311
7. Conclusio
n
With the
co
ntinuou
s im
p
r
oveme
n
t of market, cu
stome
r
servi
c
e h
a
s be
come a
n
importa
nt fact
or th
at st
ron
g
l
y influen
ce
s t
he inte
re
sts o
f
sup
p
ly
chai
n mem
b
e
r
s.
Assu
ming
the
r
e
are
no
cro
s
s-buying
in
d
ual-cha
nnel
sup
p
ly chain
com
p
o
s
ed
of one
man
u
f
acture
r
and
one
retaile
r, the in
centive
s
me
chani
sm
when
the man
u
fact
ure
r
ent
ru
sts
online
ch
ann
el se
rvice to the
retaile
r is
st
udied.
We e
s
tabli
s
h a
princip
a
l-
a
gent
model to
solve it and t
he optimal fi
xed
payment
a
n
d
optimal sha
r
ing ratio are
given.
Th
e authors also
com
pared a
nd
an
alyze
the
relation
shi
p
betwe
en service levels o
f
online ch
a
nnel an
d ret
a
il cha
nnel a
nd the impa
ct of
servi
c
e co
sts and
u
n
certain
factors
of m
a
rket on m
a
n
u
facturer
prof
it
s. The results sho
w
that the
decrease of t
he retailer’
s service
cost and the increase of
uncertai
n factors in
m
a
rket will reduce
the manufa
c
t
u
re
r’s p
r
ofits.
It is wo
rth not
ed that som
e
assumptio
n
s i
n
this text are
very strict, for
example th
at cross-buying
beh
avior
do
es
not exis
t,
whi
c
h i
s
diffe
rent from the
actu
al ma
rket
situation. Thu
s
, further a
n
d
perfect resea
r
ch
es a
r
e n
e
e
ded.
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