The Impact of Opportunism of the Manufacturer on Revenue Allocation in Supply Chain

The opportunism is a common risk in supply chain, which could include fraud, conceal or other negative behaviours. The reason of opportunism is multiple, and the most important reasons can be summarized as human nature, trade environment and information asymmetry. Due to the potential risk that opportunism will create, this field have attracted scholars to study for a long time. However, based on the literature, the gap of this field is that, scholars seldom consider about objective conditions and how these conditions impact on opportunism. Therefore, this research will focus on this field, assume a single manufacturer-retailer condition, and then set up a theoretical model which considers how the manufacturer's effort level impacts on profits, and how this situation will influence decisions that are made by the manufacturer and the retailer. Based on Monte Carlo simulation by software Crystal Ball, the result shows that different manufacturer's effort level will lead to different profits. However, manufacturer and retailer cannot achieve their largest profits in the same time. Besides, if they want to achieve the highest total profits, then both of them have to sacrifice part of their profits. Therefore, opportunism may be showed up. To prevent this happening, the optimal method is through norm-based trust mechanism, rather than just sign for contracts.