This paper deals with an integrated single-manufacturer single-retailer supply chain model for a single item. The market demand is assumed to be dependent on both the on-hand stock and price, and the manufacturer and the retailer are in an agreement of lot-for-lot policy. The proposed model is developed under the contract that the retailer offers the manufacturer a percentage of revenue (s)he generates by selling a lot. We determine optimal policies for both the centralized and decentralized coordination systems. A comparison of these policies is made with a numerical example. Sensitivity analysis is performed to examine the stability of the solution.