Collaborative solution for contract problem in book distribution systems based on distribution free approach

The publications of books, magazines, music compact discs and newspapers in Japan are traded under the resale price maintenance and consignment sale systems. By these systems, the retail price is set uniformly nationwide, and dead stock is repurchased with the same price as the wholesale price. Therefore,it has not been required that bookstores in Japan actively develop an aggressive sale policy. On the other hand, a main policy of publishing companies is to deliver a large number of books in order to secure sales space in bookstores. As a consequence, in recent years, the returned goods rate of books has reached approximately 40 percent of the quantity of publications. This fact is getting a serious problem on management and environment. Under such a situation, a new sales system is considered where the wholesale price is lowered while cutting the buyback price is considered. In this case, both the whole sale price and buyback price are important contract parameters, and should be agreed on appropriately between the publishing company and bookstore. In this article, the supply chain contract problem between bookstore and publishing company is formulated. In particular,We assume that an accurate demand distribution of books is unknown from the reason why book has long product lifecycle and uniquencss. Accordingly, we apply the distribution free approach to solve this problem by using the limited information on mean and variance of demand. Then, a new decision procedure for contract parameters such as wholesale price and buyback price is discussed and suggested using the conventional coordination approach and game theory.