Decentralized Multi-Echelon Supply Chains: Incentives and Information
Management Science
A Two-Location Inventory Model with Transshipment and Local Decision Making
Management Science
Supply Contracts, Profit Sharing, Switching, and Reaction Options
Management Science
Designing Supply Contracts: Contract Type and Information Asymmetry
Management Science
Manufacturing & Service Operations Management
Supply Chain Coordination for False Failure Returns
Manufacturing & Service Operations Management
Competitive Options, Supply Contracting, and Electronic Markets
Management Science
Quality Implications of Warranties in a Supply Chain
Management Science
Fairness and Channel Coordination
Management Science
Manufacturing & Service Operations Management
Trust in Forecast Information Sharing
Management Science
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The coordination of supply chains by means of contracting mechanisms has been extensively explored theoretically but not tested empirically. We investigate the performance of three commonly studied supply chain contracting mechanisms: the wholesale price contract, the buyback contract, and the revenue-sharing contract. The simplified setting we consider utilizes a two-echelon supply chain in which the retailer faces the newsvendor problem, the supplier has no capacity constraints, and delivery occurs instantaneously. We compare the three mechanisms in a laboratory setting using a novel design that fully controls for strategic interactions between the retailer and the supplier. Results indicate that although the buyback and revenue-sharing contracts improve supply chain efficiency relative to the wholesale price contract, the improvement is smaller than the theory predicts. We also find that although the buyback and revenue-sharing contracts are mathematically equivalent, they do not generally result in equivalent supply chain performance.