Supply chains today routinely use third parties for many strategic activities, such as manufacturing, R&D, or software development. These activities often include relationship-specific investment on the part of the vendor, while final outcomes can be uncertain. Therefore, writing complete...

We study a drop-shipping supply chain in which the retailer receives a customer's order and the supplier fills it. In such a chain, the supplier keeps inventory and bears inventory risks; the retailer focuses on marketing and customer acquisition, and forwards the orders to the supplier. The...