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Coordination and incentives in a supplier-retailer rental information goods supply chain

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Listed:
  • Khouja, Moutaz
  • Rajagopalan, Hari K.
  • Sharer, Elizabeth

Abstract

In rental information goods supply chain, such as movie DVDs and computers games, the retailer decides on the quantity of DVDs to purchase from the supplier, the rental fee, and the maximum rental duration. These decisions are directly affected by the price the supplier charges the retailers for the DVDs. In this paper we show that revenue sharing as compared to an independent strategy can result in lower rental fee, larger order quantities and increased profit for both the retailer and supplier. We also show that vertical integration (partnership) can result in higher profits across the supply chain compared to revenue sharing or an independent strategy. We also formulate a model to examine the use of incentives for early return of rented DVDs and show that they can increase profit by increasing circulations of DVDs. We also perform numerical sensitive analysis to examine the impact of rental lifecycle and shortage cost on rental fee, order quantity, and profits.

Suggested Citation

  • Khouja, Moutaz & Rajagopalan, Hari K. & Sharer, Elizabeth, 2010. "Coordination and incentives in a supplier-retailer rental information goods supply chain," International Journal of Production Economics, Elsevier, vol. 123(2), pages 279-289, February.
    • Handle: RePEc:eee:proeco:v:123:y:2010:i:2:p:279-289
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    References listed on IDEAS

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    1. Li, Sijie & Hua, Zhongsheng, 2008. "A note on channel performance under consignment contract with revenue sharing," European Journal of Operational Research, Elsevier, vol. 184(2), pages 793-796, January.
    2. repec:bla:jindec:v:49:y:2001:i:3:p:223-45 is not listed on IDEAS
    3. James D. Dana, Jr. & Kathryn E. Spier, 2001. "Revenue Sharing and Vertical Control in the Video Rental Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 223-245, September.
    4. Yunzeng Wang & Li Jiang & Zuo-Jun Shen, 2004. "Channel Performance Under Consignment Contract with Revenue Sharing," Management Science, INFORMS, vol. 50(1), pages 34-47, January.
    5. Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
    6. J A A van der Veen & V Venugopal, 2005. "Using revenue sharing to create win–win in the video rental supply chain," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(7), pages 757-762, July.
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    Cited by:

    1. Christian Wankmüller & Gerald Reiner, 2020. "Coordination, cooperation and collaboration in relief supply chain management," Journal of Business Economics, Springer, vol. 90(2), pages 239-276, March.
    2. Kogan, Konstantin & Ozinci, Yaacov & Perlman, Yael, 2013. "Containing piracy with product pricing, updating and protection investments," International Journal of Production Economics, Elsevier, vol. 144(2), pages 468-478.
    3. X. Tang & S. Fang & F. Cheng, 2014. "Strategic interactions in service supply chain with horizontal competition," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 22(2), pages 469-488, July.
    4. Liu, Zhiyong & Li, Minqiang & Kou, Jisong, 2015. "Selling information products: Sale channel selection and versioning strategy with network externality," International Journal of Production Economics, Elsevier, vol. 166(C), pages 1-10.

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