A note on channel performance under consignment contract with revenue sharing
Wang et al. [Y. Wang, L. Jiang, Z.J. Shen, Channel performance under consignment contract with revenue sharing. Management Science 50 (2004), 3447] indicate that a decentralized supply chain cannot be perfectly coordinated. This note provides a cooperative game model that implements profit sharing between the manufacturer and the retailer to achieve their cooperation. When the manufacturer and the retailer are assumed to be risk-neutral, under a very mild restriction on the demand distribution function, the cooperative game model can achieve its unique equilibrium solution in iso-price-elastic or linear demand case. Under the revenue sharing agreement attached with the equilibrium payment scheme, the decentralized supply chain can be perfectly coordinated.
consignment contract with revenue sharing coordination cooperative game supply chain management