Those of us who have been thwarted in our efforts to find a copy of a just-released video at our local video store will be interested in research conducted by Wharton professor Gerard Cachon and Martin A. Lariviere from the Kellogg Graduate School of Management. Their studies suggest that using a revenue-sharing model can be a smarter way to do business – and provide enough copies of new releases to meet demand – and relying on the traditional wholesale price-only contracts. While Cachon and Lariviere use the video cassette rental industry to make their case, their research shows that the performance of any supply chain can improve under this type of contract.
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