Supply chain coordination and decision making under consignment contract with revenue sharing

Consignment contract with revenue sharing has been widely applied in many industries and is especially popular in online marketplaces. We in this paper consider a supply chain with an upstream manufacturer and a downstream retailer where a single-period product is produced and sold. The manufacturer chooses the delivery quantity and the retail price, and the retailer sets the revenue shares. Utilizing Nash bargaining model, a cooperative game model is developed to implement profit sharing between the manufacturer and the retailer to achieve their cooperation. When the manufacturer and the retailer are assumed to be risk-neutral, under a very mild restriction on the demand distribution function, the decentralized supply chain can be perfectly coordinated and both the manufacturer and the retailer can earn more than at non-cooperation. In this paper, we also analyze the supply chain system parameters how to impact cooperative optimal decisions, retailer's channel profit share.