Two revenue sharing contracts in a three-echelon supply chain with a risk-neutral or a risk-averse retailer

Yumei Hou, Fangfang Wei, Xin Tian, Xiaoyun Liu


Purpose: This paper compares the efficiency of two revenue-sharing contracts and discusses the members’ preference for a three-echelon supply chain with the retailer’s different risk attitude.

Design/methodology/approach: This paper focuses on a three-echelon supply chain with a manufacturer, a distributor and a retailer. If the retailer is risk-neutral, the coordination of the supply chain based on the two revenue-sharing contracts is comparatively studied. If the retailer is downside-risk-aversion, the supply chain performance is comparatively analyzed and a risk-sharing contract is designed to coordinate the supply chain. Finally, the two revenue-sharing contracts under the risk-sharing contract are still compared.

Findings: Although both the two revenue-sharing contracts can coordinate the supply chain with a risk-neutral retailer, they are not always able to coordinate the supply chain with a risk-averse retailer. It is interesting that the supply chain with a risk-averse retailer can be coordinated by executing a designed risk-sharing contract, which is based on any kind of revenue-sharing contract. Finally, any kind of revenue-sharing contracts is not absolutely better than another. Based on the risk-sharing contract, the retailer’s preference is equivalent between the two contracts; but for the distributor and the manufacturer, their preferences between the two contracts are positively related to their own profit share in the supply chain.

Originality/value: Comprehensively comparing the two revenue-sharing contracts is the only presented research in the supply chain.


supply chain, three-echelon, revenue-sharing contract, risk-aversion

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Licencia de Creative Commons 

This work is licensed under a Creative Commons Attribution 4.0 International License

Journal of Industrial Engineering and Management, 2008-2019

Online ISSN: 2013-0953; Print ISSN: 2013-8423; Online DL: B-28744-2008

Publisher: OmniaScience