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Consignment Contracts With Revenue Sharing For A Capacitated Retailer And Multiple Manufacturers, Yun Fong Lim, Yunzeng Wang, Yue Wu

Research Collection Lee Kong Chian School Of Business

We consider a retailer with limited storage capacity selling n independent products. Each product is produced by a distinct manufacturer, who is offered a consignment contract with revenue sharing by the retailer. The retailer first sets a common revenue share for all products, and each manufacturer then determines the retail price and production quantity for his product. Under certain conditions on price elasticities and cost fractions, we find a unique optimal revenue share for all products. Surprisingly, it is optimal for the retailer not to charge any storage fee in many situations even if she is allowed to do so. …