Journal
INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 168, Issue -, Pages 31-40Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijpe.2015.05.036
Keywords
Consignment contract; Revenue sharing; Supply chain; Stochastic dominance; Risk attitude; Game theory
Ask authors/readers for more resources
The paper provides a thorough investigation of the revenue sharing contract format typically used in the mobile applications (Apps) industry. The platform provider sets the level of revenue sharing, and the App developer determines the investment in quality and the selling price of the App. The demand for an App, which depends on both price and quality investment, is assumed to be uncertain, so the risk attitude of the supply chain members has to be considered. Specifically, we focus on how risk-sensitive behavior of supply chain members affects chain performance. The members' equilibrium strategies are analyzed under different attitudes toward risk: averse, neutral and seeking. We show that the retailer's utility function has no effect on the equilibrium strategies, and suggest schemes to identify these strategies for any utility function of the developer. We find that (i) the revenue sharing contract circumvents the double marginalization effect associated with vertical competition and therefore yields the best selling price for the customer; (ii) a decentralized supply chain sometimes performs better than a centralized one; and (iii) a risk-seeking developer may obtain a higher expected profit than does a risk-neutral developer. (C) 2015 Elsevier B.V. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available