Exploring the Relationship between Buyback and Revenue Sharing Contracts in Channel Coordination

Effective supply contract designs are essential for ensuring coordination among the supply chain members involved. Two typical coordinated contracts are buyback contracts and revenue-sharing contracts. This study investigates how the contract parameters are designed in each contract type for channel coordination and explores the relationship between these two supply contracts. We especially examine the supply contract designs under various market power structures among supply chain members. Furthermore, we analyze the relationship between the profit volatilities in the two contract types. The results demonstrate that, with appropriate parameter design, these contracts fundamentally exhibit no difference in terms of profit volatility as well as expected profit. This study contributes to the understanding of supply chain contracting by shedding light on the nuanced relationship between buyback and revenue-sharing contracts.