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Channel coordination through a revenue sharing contract in a two-period newsboy problem
Authors:Cao To Linh  Yushin Hong
Institution:Department of Industrial and Management Engineering, POSTECH, San 31, Hyoja, Republic of Korea
Abstract:This paper studies channel coordination through revenue sharing contract between a single retailer and a single wholesaler in a two-period newsboy problem. Two models are discussed, a single-buying-opportunity model and a two-buying-opportunity model. We discuss how the revenue sharing ratio and the wholesale prices are to be determined in order to achieve channel coordination and a win–win outcome. We find that the wholesale prices are set to be lower than the retail prices and the optimal revenue sharing ratio is linearly increasing in the wholesale prices. The proposed revenue sharing contract has more flexibility than price protection, in that the optimal revenue sharing ratio can be settled reasonably through negotiation between the retailer and wholesaler.
Keywords:Supply chain management  Channel coordination  Revenue sharing contract  Two-period newsboy problem
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