Study on revenue sharing contract mechanism in supply chain under non-cooperative decision-making

Abstract

The revenue sharing contract mechanism of a two-level supply chain including one manufacture and one retailer under non-cooperative decision-making was researched. Firstly, a Stackelberg model which the manufacturer is leader and the retailer is follower under risk neutral case. Then the Mean-Variance model when the retailer is risk averse with stochastic market demand was established analytically. The analysis results showed that there would exist an unique equilibrium of the Stackelberg model if the demand model satisfied the increasing generalized failure rate(IGFR) property with given revenue sharing coefficient and coefficient of risk aversion. The expected profit of the retailer was increasing firstly and then decreasing, but the expected profit of manufacturer and the supply chain were decreasing with the revenue sharing coefficient increasing. Finally, the conclusions were verified by a numerical example.