Many firms have enjoyed remarkable success using revenue-sharing contracts to improve supply chain performance. The video rental industry and its pioneering deal with movie studios is one such example. At the same time, other firms have struggled to make it work. What accounts for this...

We consider a multi-supplier, single-manufacturer supply chain where each supplier sells a different component at varying quality levels. The manufacturer has to decide on which quality level to choose for each component, trading-off the total cost and total quality. Each supplier decides on a...