Joint Pricing-Production Quantity Decision Under Consignment Contract With Revenue Sharing When Manufacturing Cost Is Asymmetric

In a two-echelon supply chain under consignment contract with revenue sharing, firstly, the manufacturer reports his manufacturing cost to the retailer; secondly, for each item sold, the retailer deducts a percentage from the selling price and remits the balance to the supplier according to the manufacturer' s manufacturing cost reported; thirdly, the supplier decides on the retail price and delivery quantity for his product, and retains ownership of the goods. To maximize her own profit, the manufacturer will misreport his manufacturing cost for asymmetric information. In this paper we show that there is a unique solution in equilibrium. Those elegant analytical results allowed us to know how the supplier decides on the retail price and delivery quantity for his product. From our research, we also know how the supplier' s decision changes with system parameters.