Abstract: A kind of profit sharing contract and its response method to variance of demand price flexibility have been designed by considering that the risk of supply chain has not been completely shared by the members with revenue sharing contract. According to the contract,the supplier transfers middle product to the retailer with price of unit cost,and shares the system profit properly. Parameters of the contract should be adjusted to induce the decision of the retailer. The research shows that,the profit sharing contract can coordinate the supply chain. Reasonable response to change of and the retailer accept the adjusted contract,which is helpful to optimize the profit of supply chain.Study of simulated case demonstrates the effectiveness of the profit sharing contract and the response method.

Key words: supply chain coordination, profit sharing contract, response method