Correcting decision outcomes in a revenue sharing contract

In this paper, we study methods that could improve the performance of a coordinating supply chain contract. Past studies indicate that such contracts as revenue sharing do not necessarily coordinate a supply chain in practice. We propose an approach which could possibly correct this inefficiency by incentivizing the retailer to improve supply chain outcomes. Experimental studies on human subjects are used as the basis to verify our framework in modeling decisions outcomes. Our results show that a revenue sharing contract can still coordinate a supply chain if the retailer is offered additional incentives. We also discuss limitations of our analysis and provide suggestions for further research on how coordinating contracts could be designed to deliver consistent optimal performance.