Supply Chain Coordination under Price and Effort-Dependent Demand with Revenue Sharing Contract

Revenue-Sharing (RS) contract is a kind of mechanism to improve the performance or to achieve the perfect coordination of supply chain (SC). In view of the fact that an one- supplier one-retailer supply chain faces stochastic effort and price-dependent demand, a model of the revenue-sharing contract is established. The paper shows: whether the retailer or the supplier bears the cost of effort alone, RS contract can not coordinate SC; only when the retailer and the supplier both bear the cost of effort, can RS contract coordinate SC. The share that both sides bear the cost of effort is precisely equal to the share that the retailer gives his revenue to the supplier.