Markdown money contracts for perishable goods with clearance pricing

Charles X. Wang, Scott Webster

Research output: Contribution to journalArticlepeer-review

41 Scopus citations


It is common in practice that retailers liquidate unsold perishable goods via clearance pricing. Markdown money is frequently used between manufacturers and retailers in such a supply chain setting. It is a form of rebate from a manufacturer to subsidize a retailer's clearance pricing after the regular season. Two forms of markdown money are percent markdown money, in which the markdown money is limited to only a certain percentage of the retail price markdown, and quantity markdown money, which is essentially a buyback contract or returns policy with a rebate credit paid to the retailer for each unsold unit after the regular season. We show both forms of markdown money contracts can coordinate the supply chain and we discuss their strengths and limitations.

Original languageEnglish (US)
Pages (from-to)1113-1122
Number of pages10
JournalEuropean Journal of Operational Research
Issue number3
StatePublished - Aug 1 2009
Externally publishedYes


  • Clearance pricing
  • Markdown money
  • Supply chain contracts
  • Supply chain management

ASJC Scopus subject areas

  • General Computer Science
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management


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