Abstract—On the premise ofone supplier and one retailer supply chain facing stochastic effortdependent demand, this paper analyzes the impact of effort factor on supplychain collaboration and proves the normal revenue-sharing contract can notcoordinate the supply chain. Hence, the paper establishes a coordinationmechanism with effort cost sharing to restore the coordination of supply chain.Furthermore, It proves this coordination may be broken off by an emergentevent, which may make the demand disruptions. Then the paper proposes an adjusted revenue- sharing contract which hasanti-disruption ability as an optimal strategy for supply chain to thedisruption.Finally,the paper gives an numerical example to illustrate the model and the solutionprocess.

Index Terms—supply chain coordination; revenue-sharing contract;effort factor; disruption management

I.INTRODUCTION

Under arevenue-sharing contract, the supplier sells at a wholesale price belowmarginal cost, but her participation in the retailer’s revenue more thanoffsets the loss on sales[1]. Revenue-sharing contract originated in the videorental industry, afterward, many scholars have done their in-depth studies toit and promoted the application. Dana and Spier[2] find that revenue sharing ismore effective when the supplier sells to perfectly competitive retailers.Cachon and Lariviere[1] find that revenue sharing coordinates a broader arrayof supply chains than do buybacks.In particular, revenue sharing continues tocoordinate a newsvendor with price-dependent demand, which buybacks cannot.Ilaria and Pierpaolo[3] propose a contract model based on a revenue sharingmechanism to coordinate a three-stage supply chain.

However, themajority of the literature on revenue-sharing contract do not consider theimpact of sales efforts on demand, which is not tally with the actualsituation. In real life, the sales efforts is one of the important factors todemand[4]. the sales efforts include hiring more sales people, improving theirtraining, increasing advertising, better maintaining the attractiveness of theproduct’s display, enhancing the ambiance of the store interior, etc. All ofthose activities are costly. If the retailer bears the cost of the effort, thenshe will only choose the level of efforts which is most favorable to herself.The problem 

is that those activities benefit both the retailer and the supplier,but are costly to only one. Cachon[5] proves revenue-sharing 

contracts can not coordinate supply chainwith effort dependent demand, but he does not give a solution to this problem.