Approaches to designing the revenue sharing contract under asymmetric cost information

摘要

We investigate different approaches to designing price-only and revenue sharing (RS) contracts between a manufacturer and a newsvendor retailer in the case of asymmetric cost information. The manufacturer, i.e. contract designer, has estimations about the retailer's cost with the corresponding probabilities. We address two general approaches: in Approach 1, the manufacturer designs the contracts using the average of cost estimations, while in Approach 2, the manufacturer designs the contracts using all cost estimations. In Approach 2, we first model a reservation profit for each retailer type, explicitly based on the price-only contract (Approach 2-1). Then, we investigate how to design a unique RS contract (Approach 2-2) and a menu of coordinating RS contracts (Approaches 2-3 and 2-4). Approaches 2-2, 2-3 and 2-4 are designed based on a cut-off policy in which the manufacturer offers a price-only contract to the retailer if the retailer's cost is greater than a specific level. We find that in Approach 1, the price-only contract is more profitable than the RS contract for the manufacturer. Both firms' expected profits are increased considerably in Approach 2, as compared to Approach 1. Approach 2-4 results in the highest expected profit for both firms. However, if this approach leads to high administrative costs for the manufacturer, Approach 2-2 can be an appropriate substitute. Numerical analysis and a number of managerial and analytical insights are presented.