Revenue Sharing Contract Design in Supply Chain under Asymmetric Information

The problem of supply chain coordination with revenue sharing contract is studied under asymmetric information. Since the first best coordinating contract under complete information leads to distortion of low cost retailer´s order quantity in the setting of asymmetric information, the supplier and the supply chain may incur profit loss. The impact of asymmetric information is analyzed using the analytical framework of contract theory. The second best revenue sharing contract is proposed. It increases the supplier´s expected profit and the efficiency of the supply chain by paying some information rent to the low cost retailer. The conclusion is confirmed by the numerical analysis.