Abstract: The wholesale price contract with price dependent demands is discussed for a supply chain composed of a manufacturer and a retailer. In such a supply chain, the manufacturer determines the wholesale price, while the retailer determines the ordering quantity and sale price. The supply chain can operate under centralized or decentralized decision making mode. In this study, the profits, sale price, and sale quantity resulting from centralized decision making are set as benchmark. To explore the performance of decentralized decision making, the profits, sale price, and sale quantity resulting from decentralized decision making are compared with the benchmark. By doing so, it is shown how the wholesale price and the price elasticity affect the efficiency of the supply chain and profit distribution in the supply chain.

Key words: price elasticity, price dependent demands, wholesale price contract, supply chain