Revenue-sharing contracts

Change in contracts. Revenue sharing, cost sharing, technology sharing, and resource-sharing arrangements are entered into between enterprise and its business partners. 

As in buyback contracts, revenue-sharing contracts also result in the supply chain producing to retailer orders rather than to actual consumer d and. This information distortion results in excess inventory in the supply chain and a greater mismatch between supply and demand. The information distortion increases as the number of retailers to which the supplier sells grows. As... 

I. Giannoccaro, and P. Pontrandolfo, Supply Chain Coordination by Revenue Sharing Contracts, International Journal of Production Economics, 89, 131-139 (2004). 

Observation 4. None of the following contracts - returns, quantity-flexibility, penalty (all as described by Lariviere 1999), revenue sharing (as described by Cachon and Lariviere 2000), or quantity discount (as described by Jeuland and Shugan 1983) - can coordinate the supply chains in Models T or D. 

Cachon, G. P. and M. A. Lariviere. 2000. Supply chain coordination with revenue-sharing contracts strengths and limitations. Forthcoming, Management Science. 

Change in pricing. This may impact sales contracts and revenue sharing contracts among the enterprise partners due to a potential change in product sales volume or its market share. 

PRICING FOR COORDINATION In many instances, suitable pricing schemes can help coordinate the supply chain. A manufactmer can use lot-size-based quantity discounts to achieve coordination for commodity products if the manufacturer has large fixed costs associated with each lot (see Chapter 11 for a detailed discussion). For products for which a firm has market power, a manufacturer can use two-part tariffs and volume discounts to help achieve coordination (see Chapter 11 for a detailed discussion). Given demand uncertainty, manufactmers can use buyback, revenue-sharing, and quantity flexibility contracts to spur retailers to provide levels of... 

The revenue-sharing contract does require an information infrastructure that allows the supplier to monitor sales at the retailer. Such an infrastructure can be expensive to build. As a result, revenue-sharing contracts may be difficult to manage for a supplier selling to many small buyers. 

TABLE 15-4 1 Order Sizes and Profits in Music Supply Chain Under Different Revenue-Sharing Contracts ... 

Relative to buyback and revenue-sharing contracts, quantity flexibihty contracts have less information distortion. Consider the case with multiple retailers. With a buyback contract, the supply chain must produce based on the retailer orders that are placed well before actual demand arises. This leads to surplus inventory being disaggregated at each retailer. With a quantity flexibility contract, retailers specify only the range within which they will purchase, well before actual demand arises. If demand at various retailers is independent, the supplier does not need to... 

Risk sharing in a supply chain increases profits for both the supplier and the retailer. Risk sharing mechanisms include buybacks, revenue sharing, and quantity flexibility. Quantity flexibility contracts result in lower information distortion than buyback or revenue-sharing contracts when a supplier sells to multiple buyers or the supplier has excess, flexible capacity. 

Explain why, for the same inventory level, a revenue-sharing contract results in a lower sales effort from the retailer than if the retailer has paid for the product and is responsible for all remaining inventory. 

Revenue can be explained using many characteristics. We decided to use behavioural characteristics to explained such as contract choice, risk, bounded rationahty and perceived bargaining power. One characteristic of the contract is that it is a mechanism to share risk, reduce the uncertainties produced by bounded rationality and a ay to determine who has the bargaining power in a relationship. 

Risk sharing is an important topic in contract design because it affects both the cost of riskbearing and the motivation to behave in a certain way (Bogetoft and Olesen, 2004). According to Fafchamps (2004), if a producer is a risk taker then the effect over the revenues will be positive, therefore this study compared agricultural case studies from Madagascar, Benin and Malawi. 

The negotiation process in during the sessions has a time periods of ten minutes, where participants bargain about several contract attributes, and tried to share risk and practice their perceived bargaining power in the presence of bounded rationahty in both sides of the agreement. The main idea is to assess the effect of those behaviomal characteristics to the revenue of the participants. 

But let us advert to the large debt which we have ourselves contracted in a single war, and let us only calculate on a common share of the events which disturb the peace of nations, and we shall instantly perceive without the aid of any elaborate illustration, that there must always be an immense disproportion between the objects of Federal and State expenditures. It is true that several of the States separately are incumbered with considerable debts, which are an excrescence of the late war. But when these are discharged, the only call for revenue of any consequence, which the State Governments will continue to experience, will be for the mere support of their respective civil lists to which, if we add all contingencies, the... 

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