Two revenue sharing contracts in a three-echelon supply chain with a risk-neutral or a risk-averse retailer
Abstract: This paper compares
the efficiency of two revenue-sharing contracts and discusses the members’
preference for a three-echelon supply chain with the retailer’s different risk
attitude.
Design/methodology/approach: This paper focuses on a three-echelon supply
chain with a manufacturer, a distributor and a retailer. If the retailer is
risk-neutral, the coordination of the supply chain based on the two
revenue-sharing contracts is comparatively studied. If the retailer is
downside-risk-aversion, the supply chain performance is comparatively analyzed
and a risk-sharing contract is designed to coordinate the supply chain.
Finally, the two revenue-sharing contracts under the risk-sharing contract are
still compared.
Findings: Although both the two revenue-sharing contracts can coordinate
the supply chain with a risk-neutral retailer, they are not always able to
coordinate the supply chain with a risk-averse retailer. It is interesting that
the supply chain with a risk-averse retailer can be coordinated by executing a
designed risk-sharing contract, which is based on any kind of revenue-sharing
contract. Finally, any kind of revenue-sharing contracts is not absolutely
better than another. Based on the risk-sharing contract, the retailer’s
preference is equivalent between the two contracts; but for the distributor and
the manufacturer, their preferences between the two contracts are positively
related to their own profit share in the supply chain.
Originality/value: Comprehensively comparing the two revenue-sharing
contracts is the only presented research in the supply chain.
Keywords: supply chain,
three-echelon, revenue-sharing contract, risk-aversion
Author: Yumei Hou, Fangfang
Wei, Xin Tian, Xiaoyun Liu
Journal Code: jptindustrigg150099
