Abstract
We study a capacity reservation contract for a product between a set-maker and a semiconductor manufacturer. In the capacity reservation contract, the set-maker pays a capacity reservation cost for the product in return for the minimum amount of capacity to be prepared by the semiconductor manufacturer. Since the capacity reservation cost depends not on the order quantity but on the reservation quantity, the set-maker shares the part of capacity preparation cost. In the literature dealing with this model, the unit ordering cost is treated as exogenous, and the unit capacity preparation cost is a decision variable of the semiconductor manufacturer. As a consequence, there does not necessarily exist any capacity reservation contract that leads to the supply chain coordination, i.e., the maximum sum of the both players’ expected profits. In this paper, we derive the region of two variables leading to the supply chain coordination. Furthermore, we derive the range of allocation of the optimal expected supply chain profit to the both players．
