• Management Science and Financial Engineering
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• v.19 no.2
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• pp.1-11
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• 2013

An interesting puzzle in business practices is that although many researchers emphasize the benefits of a revenue-sharing contract, a wholesale contract has remained to be the most common contractual form. By introducing the concept of unobservable efforts, we examine the contractual efficiency of a wholesale contract and a revenue-sharing contract. The multi-task agency model and experimental design approach are used to analyze the relationship between the contractual efficiency and parameters. A major finding of our study is that a wholesale contract coordinates unobservable efforts, while it fails to coordinate the order quantity decision. Because unobservable efforts have mixed effects on the contractual efficiency, the superiority of contract type depends on parameters. This finding implies that a wholesale contract can be a competitive contract, especially when unobservable efforts are heavily involved. Our conclusion is that the current popularity of a wholesale contract is manager's rational response to complex supply chain environments rather than irrational behaviors.

• Agribusiness and Information Management
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• v.9 no.1
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• pp.1-6
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• 2017

Recent scandals of milk additives in several developing countries provoked controversy about quality issue of dairy products, grapping academic attention to the dairy supply chain. In this paper, we first focus on moral hazard problem of self-interested entities about the quality across the dairy supply chain, due to unobservable and unverifiable quality management efforts of all entities - including dairy producers, stations, and a final producer - and high inspection cost for the quality. Based on the identified moral hazard problem, we understand why the adoption of IoT-based tracking systems about quality produced from each entity is a must, different from RFID-based tracking systems.