Bullwhip effect in pricing under the revenue-sharing contract

Abstract

Bullwhip effect in Pricing (BP) is the amplification or absorption of price fluctuation across the supply chain. This paper aims to derive conditions for BP under a revenue-sharing contract. For this purpose, we consider both a deterministic model and stochastic newsvendor models with additive and multiplicative uncertainties assuming both the linear and isoelastic demand forms. Contrasting the results with a no-contract case, this paper shows that the cost-pass-through and the BP ratio increase with the increase of the revenue-share percentage. Numeric simulations also showed different phases of price-variation for the linear and the isoelastic demand forms.