TY - JOUR
T1 - On channel coordination under price-dependent revenue-sharing
T2 - Can eBay's fee structure coordinate the channel
AU - Chen, J. M.
AU - Cheng, H. L.
AU - Lin, I. C.
N1 - Funding Information:
Acknowledgements—The authors would like to thank the anonymous reviewer for his/her insightful comments and suggestions that have significantly improved the article. This research was partially supported by the National Science Council (Taiwan) under Grant NSC98-2410-H-008-009-MY3.
PY - 2011/11
Y1 - 2011/11
N2 - This article deals with the problem of coordinating a vertically separated channel under consignment contracts with a price-dependent revenue-sharing (R-S) function. We consider the retailer being a channel leader who offers the vendor a leave-it-or-take-it contract, and the vendor being a price-setting firm who sells the one-of-a-kind goods through the exclusive channel. Under such a setting, the retailer decides on the term of R-S contract, and the vendor determines the retail price of the product. For each item sold, the retailer deducts an agreed-upon percentage from the price and remits the balance to the vendor. We model the decision-making of the two firms as a Stackelberg game, and carry out equilibrium analysis for both the centralized and decentralized regimes of the channel with consideration of three kinds of contracts: the fixed, the price-increasing, and the price-decreasing R-S percentage. Our analysis reveals that the contract with a price-decreasing R-S function, for example, the fee structure adopted by eBay.com, performs worse than the others. It persists in a consistent bias: the price-decreasing R-S induces the vendor to choose a higher price, and the retailer tends to receive a lower R-S percentage, which leads to less demand quantity, less profit, and channel inefficiency.
AB - This article deals with the problem of coordinating a vertically separated channel under consignment contracts with a price-dependent revenue-sharing (R-S) function. We consider the retailer being a channel leader who offers the vendor a leave-it-or-take-it contract, and the vendor being a price-setting firm who sells the one-of-a-kind goods through the exclusive channel. Under such a setting, the retailer decides on the term of R-S contract, and the vendor determines the retail price of the product. For each item sold, the retailer deducts an agreed-upon percentage from the price and remits the balance to the vendor. We model the decision-making of the two firms as a Stackelberg game, and carry out equilibrium analysis for both the centralized and decentralized regimes of the channel with consideration of three kinds of contracts: the fixed, the price-increasing, and the price-decreasing R-S percentage. Our analysis reveals that the contract with a price-decreasing R-S function, for example, the fee structure adopted by eBay.com, performs worse than the others. It persists in a consistent bias: the price-decreasing R-S induces the vendor to choose a higher price, and the retailer tends to receive a lower R-S percentage, which leads to less demand quantity, less profit, and channel inefficiency.
KW - channel coordination
KW - decision analysis
KW - game theory
KW - inventory
KW - revenue-sharing
UR - http://www.scopus.com/inward/record.url?scp=79957747516&partnerID=8YFLogxK
U2 - 10.1057/jors.2010.174
DO - 10.1057/jors.2010.174
M3 - 期刊論文
AN - SCOPUS:79957747516
SN - 0160-5682
VL - 62
SP - 1992
EP - 2001
JO - Journal of the Operational Research Society
JF - Journal of the Operational Research Society
IS - 11
ER -