Supply chain coordination with innovation subsidy under elastic demand

This paper studies the coordination issue of a supply chain,where the manufacture subsidizes the innovation of its supplier in order to reduce the supply cost.Criteria to judge whether the innovation subsidy are accepted by two players are derived.The results demonstrate that when the price is a decision variable of the manufacture,the total profit of the supply chain can be improved by choosing its own optimal price,but the perfect coordination of the chain can not be achieved.To coordinate the supply chain perfectly,a incentive mechanism is proposed based on the sales target.And a domain of the sales target that benefits two participants is presented.