How Negotiation Influences the Effective Adoption of the Revenue Sharing Contract: A Multi-Agent Systems Approach

Abstract

Supply Chain Management (SCM) can be pursued by adopting a centralized or decentralized control. In the former case, a unique decision maker exists in the SC, who possesses any information on the whole SC that is relevant to make decision and the contractual power to have such decisions be implemented. The centralized control assures the system efficiency (channel coordination). In the case of decentralized control, different decision makers exist in the supply chain (SC), who pursue their own objectives, which can be conflicting and lead to system inefficiency. To cope with this problem, proper coordination mechanisms need to be adopted, which modify the incentives of the different decision makers, so as to induce them to maximize the SC total profit. SC contracts are coordination mechanisms that utilize incentives to make SC actors’ decisions coherent among each other. In particular, the incentives let the risk and the revenue (which arise from different sources of uncertainty and from channel coordination, respectively) be shared by all SC actors. SC contracts allow two main objectives to be achieved: i) to increase the total SC profit so as to make it closer to the profit resulting from a centralized control (channel coordination) and ii) to share the risks among the SC partners (Tsay