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Coordination of supply chain investments and the advantage of revenue sharing

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Abstract

As examples of the practice show, revenue-sharing agreements between independent companies are arranged to coordinate a supply chain. Using an incomplete contracting model this article identifies conditions under which revenue-sharing agreements as well as pricing agreements are favorable for the involved companies. The main results show that revenue sharing increases the investment tendency of the upstream company to make revenue affecting specific investments and, under certain circumstances, increases the expected profit of both companies. Therefore, revenue sharing should be used if the success of the supply chain depends on a supply chain-crossing differentiation strategy.

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  1. Managerial Accounting and Control, Schumpeter School of Business and Economics, Gausstraße 20, 42119, Wuppertal, Germany

    Christian Lohmann MBR

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  1. Christian Lohmann MBR
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Correspondence to Christian Lohmann MBR.

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Lohmann, C. Coordination of supply chain investments and the advantage of revenue sharing. Z Betriebswirtsch 80, 969–990 (2010). https://doi.org/10.1007/s11573-010-0388-9

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