Negotiation of the revenue sharing contract: An agent-based systems approach

This paper focuses on the implementation issues of the revenue sharing (RS) contract. This is a coordination mechanism, which aligns the incentives of independent SC actors so as to induce them to act in such a way that is optimal for the supply chain as a whole (channel coordination). The literature pays attention mainly to the design of the contract parameters so as to assure the channel coordination, whereas much less emphasis is given to the analysis of the conditions supporting the contract implementation. Even if an effective RS contract exists for a given SC, this does not imply that the SC agents will adopt it. In fact, they need to reach an agreement on the values of the contracts parameters, given that they influence their profit. As a result, every SC actor will tend to impose her own preferences that could not be accepted by the others. We model the negotiation process among the SC actors by adopting agent-based simulation. This is particularly useful to model independent actors that need to coordinate among each other. The proposed model takes into account the main variables influencing the behavior of the SC actors in the negotiation process; namely the contractual power and the collaboration among the SC actors. Finally, we carry out a simulation analysis aimed at identifying the scenarios which favor the use of the RS contract. (C) 2009 Published by Elsevier B.V.