Abstract

We analyse a two stage supply chain with a single risk neutral manufacturer and a risk neutral retailer in a single period setting. The retailer associates costs towards procurement of the product and its marketing and sales. These costs are often private information of the retailer; the retailer has an incentive to overstate his associated costs to acquire a larger share of revenue. In this paper, assuming retailers have private information about their associated costs we derive an optimal revenue sharing contract as designed by the manufacturer for each of the cost structure of the retailers. The retailer's choice from such a contract menu reveals information about their true cost. We analyse our model under various scenarios; we observe that the proposed revenue sharing contract improves the profit of manufacturer and that of the total supply chain.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.