Study Of Revenue Sharing Contracts Based On Effort Cost Sharing In Supply Chain

Coordination between the buyer and the seller is one of the important issues in supply chain management. This paper investigates the coordination problem in a two-stage supply chain when the demand is dependent on retailer's effort. The aim of the paper is to design a coordination mechanism through revenue sharing contract when the demand is effort-dependent. The traditional revenue sharing contract which can obtain coordination assumes demand is stochastic, not considering the impacts of retailer's sales efforts on the demand. This paper proposes a model which adds effort cost sharing to the traditional revenue sharing contact for the coordination of the supply chain. When the demand is relevant to retailer's effort, we prove that the improved revenue sharing contract can coordinate the supply chain and the relationships between contract parameters are derived, Finally, the model is demonstrated with a suitable numerical example.