Abstract: The supply chain system composed of a manufacturer and a newsvendor retailer is the focus of this paper. In such system, the point is how to design contracts which aim at maximizing the manufacturer's expected revenue by incenting the retailer's demand forecast decision. A static game model is developed for the contract designing. It is found that the contract with demand forecast can lead to higher expected revenue with low forecasting cost in the centralized supply chain. As in the decentralize supply chain, the manufacturer bears the cost entirely and its expected revenue is negatively related to forecasting cost when the contract with demand forecast is selected, but the manufacturer's expected revenue is nondecreasing as forecasting cost increase when the contract without demand forecast is selected. Moreover, the optimal strategy about which contract can maximize the manufacturer's expected revenue is given.

Key words: supply chain, forecasting, contract, shortage cost