Abstract This paper conducts a research on RFID technology investment decisionmaking in a twolevel retail supply chain suffering from inventory misplacement and shrinkage. The models of the supply chain with and without RFID technology are constructed and analyzed, in which buy back contracts are introduced to realize supply chain Pareto dominance. Then the cost threshold at which RFID adoption becomes profitable for both partners in retail supply chain is obtained. The results show that buy back contracts can coordinate the supply chain under implementation of RFID. And the higher production costs and inventory costs of commodities, the higher misplacement rate and shrinkage rate, the willingness of supply chain enterprises to invest in RFID will be stronger.
2013, Vol. 10 
