Revenue Sharing Contracts and Coordination in the Mobile Service Supply Chain

Mobile service providers often motivate sales agents to attract more potential customers by sharing part of service revenue with agents. Motivated by the practice in the mobile service industry, we build a theoretical model considering a mobile service chain with a service provider selling multiple kinds of SIM cards to a newsvendor-like agent under a specifc revenue sharing contract. We compare the optimal outcomes in three models: 1) the wholesale model, where the service provider acts as the Stackelberg game leader and sets the wholesale price; 2) the centralized model, where decisions are made to maximize the total profit of the service chain; and 3) the revenue sharing model, where both players reach an agreement on the contract parameters on transactions. Our results show that the revenue sharing contract is beneficial for both players. Under proper parametric values, it can achieve supply chain coordination and Pareto improvement compared to the traditional strategies. Furthermore, we conduct a numerical experiment with real data from a large mobile service in China and find that coordination can increase total profits by 21.47%. Sensitivity analyses show that both players benefit more from coordination when the uncertainty of potential demand in the market is higher or the discount factor is lower. Our findings contribute to the literature on revenue sharing contracts and provide managerial insights for practitioners in the mobile service industry