Share:


Capacity sharing strategy with sustainable revenue-sharing contracts

    Junlong Chen   Affiliation
    ; Jiayan Shi   Affiliation
    ; Jiali Liu   Affiliation

Abstract

This paper develops a duopoly model to analyse capacity sharing strategy and the optimal revenue-sharing contract under a two-part tariff and examines the effects of capacity sharing, cost, and sharing charges in three scenarios. The paper uses the two-part tariff method and adds a more realistic assumption of incremental marginal costs to improve the research on capacity sharing strategies. The results show that capacity constraints affect the sustainable development of firms. A sustainable revenue-sharing contract can create a win-win situation for both firms and promote capacity sharing. Capacity sharing, cost, and the revenue-sharing rate have different impacts in different scenarios; the optimal revenue-sharing rate and fixed fee can be determined to maximise the profits of firms that share capacity. However, capacity sharing may not improve social welfare.


First published online 28 December 2021

Keyword : duopoly, capacity sharing strategy, sustainable revenue-sharing contracts, two-part tariff, win-win development

How to Cite
Chen, J., Shi, J., & Liu, J. (2022). Capacity sharing strategy with sustainable revenue-sharing contracts. Technological and Economic Development of Economy, 28(1), 76–100. https://doi.org/10.3846/tede.2021.16030
Published in Issue
Jan 12, 2022
Abstract Views
70
PDF Downloads
54
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Ben Elhadj, N., Jebsi, K., & Lahmandi-Ayed, R. (2012). Quality and capacity choices in a vertical differentiation model with congestion. Interna-tional Journal of Economic Theory, 8(3), 259–275. https://doi.org/10.1111/j.1742-7363.2012.00190.x

Cachon, G., & Lariviere, M. (2005). Supply chain coordination with revenue-sharing contracts: Strengths and limitations. Management Science, 51(1), 30–44. https://doi.org/10.1287/mnsc.1040.0215

Chen, J., Liu, J., & Qin, J. (2019). Corporate social responsibility and capacity selection. Transformations in Business & Economics, 18(3C), 530–545.

Chen, J., Sun, C., Liu, J., & Huo, Y. (2021a). The optimal level of corporate social responsibility based on the duopoly model. Managerial and Decision Economics, 42(1), 177–184. https://doi.org/10.1002/mde.3222

Chen, J., Xie, X., & Liu, J. (2020a). Capacity sharing with different oligopolistic competition and government regulation in a supply chain. Mana-gerial and Decision Economics, 41(1), 79–92. https://doi.org/10.1002/mde.3094

Chen, J., Wang, X., & Chu, Z. (2020b). Capacity sharing, product differentiation and welfare. Economic Research-Ekonomska Istrazivanja, 33(1), 107–123. https://doi.org/10.1080/1331677X.2019.1710234

Chen, J., Wang, X., & Liu, J. (2021b). Corporate social responsibility and capacity sharing in a duopoly model. Applied Economics Letters, 28(6), 512–517. https://doi.org/10.1080/13504851.2020.1761531

Chen, J., Wei, Z., Liu, J., & Zheng, X. (2021c). Technology sharing and competitiveness in a Stackelberg model. Journal of Competitiveness, 13(3), 5–20. https://doi.org/10.7441/joc.2021.03.01

Chen, Y., & Nie, P. (2014). Duopoly innovation under product externalities. Economic Research-Ekonomska Istraživanja, 27(1), 232–243. https://doi.org/10.1080/1331677X.2014.952092

Choi, K., & Lee, D. (2020). Do firms choose overcapacity or undercapacity in a vertical structure? Managerial and Decision Economics, 41(5), 839–847. https://doi.org/10.1002/mde.3141

Dussauge, P., Wassmer, U., & Planellas, M. (2010). How to manage alliances better than one at a time. Post-Print, 51(3), 77.

Dong, Q., & Barcena-Ruiz, J. (2021). Corporate social responsibility and partial privatisation of state holding corporations. Journal of Economics, 132(3), 223–250. https://doi.org/10.1007/s00712-020-00725-5

Fang, D., & Wang, J. (2020). Horizontal capacity sharing between asymmetric competitors. Omega, 97, 102109. https://doi.org/10.1016/j.omega.2019.102109

Feng, X., Moon, I., & Ryu, K. (2017). Warehouse capacity sharing via transshipment for an integrated two-echelon supply chain. Transportation Research Part E: Logistics and Transportation Review, 104, 17–35. https://doi.org/10.1016/j.tre.2017.04.014

Gorelick, D., Zeff, H., Hughes, J., Eskaf, S., & Characklis, G. W. (2019). Exploring treatment and capacity-sharing agreements between water utilities. Journal American Water Works Association, 111(9), 26–40. https://doi.org/10.1002/awwa.1359

González-Blanco, J., Vila-Alonso, M., & Guisado-González, M. (2019). Exploring the complementarity between foreign technology, embedded technology and increase of productive capacity. Technological and Economic Development of Economy, 25(1), 39–58. https://doi.org/10.3846/tede.2019.7600

Guo, L., & Wu, X. (2018). Capacity sharing between competitors. Management Science, 64(8), 3554–3573. https://doi.org/10.1287/mnsc.2017.2796

Hu, X., Caldentey, R., & Vulcano, G. (2013). Revenue sharing in airline alliances. Management Science, 59(5), 1177–1195. https://doi.org/10.1287/mnsc.1120.1591

Ignatius, J., Tan, T. S., Dhamotharan, L., & Goh, M. (2018). Deregulation control by mergers and acquisitions: A game theoretic analysis of the Chinese airline industry. Technological and Economic Development of Economy, 24(6), 2277–2294. https://doi.org/10.3846/20294913.2016.1266410

Jain, R., & Pal, R. (2012). Mixed duopoly, cross-ownership and partial privatization. Journal of Economics, 107, 45–70. https://doi.org/10.1007/s00712-011-0260-6

Li, L., & Zhang, R. (2015). Cooperation through capacity sharing between competing forwarders. Transportation Research, 75(1), 115–131. https://doi.org/10.1016/j.tre.2014.11.003

Liu, S., Hua, G., Cheng, T., & Dong, J. (2021). Unmanned vehicle distribution capacity sharing with demand surge under option contracts. Trans-portation Research Part E: Logistics and Transportation Review, 149, 102320. https://doi.org/10.1016/j.tre.2021.102320

Melo, S., Macedo, J., & Baptista, P. (2019). Capacity-sharing in logistics solutions: A new pathway towards sustainability. Transport Policy, 73, 143–151. https://doi.org/10.1016/j.tranpol.2018.07.003

Moghaddam, M., & Nof, S. (2014). Combined demand and capacity sharing with best matching decisions in enterprise collaboration. International Journal of Production Economics, 148(2), 93–109. https://doi.org/10.1016/j.ijpe.2013.11.015

Nie, P.-Y., Wang, C., Chen, Y.-H., & Yang, Y.-C. (2018). Effects of switching costs on innovative investment. Technological and Economic Development of Economy, 24(3), 933–949. https://doi.org/10.3846/tede.2018.1430

Nunes, B., Santos, M., de Oliveira, B., Margi, C., Obraczka, K., & Turletti, T. (2014). Software-defined-networking-enabled capacity sharing in user-centric networks. IEEE Communications Magazine, 52(9), 28–36. https://doi.org/10.1109/MCOM.2014.6894449

Nakamura, Y. (2014). Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm. International Review of Economics & Finance, 34, 105–117. https://doi.org/10.1016/j.iref.2014.07.004

Qi, A., Ahn, H., & Sinha, A. (2019). To share or not to share? capacity reservation in a shared supplier. Production and Operations Management, 28(11), 2823–2840. https://doi.org/10.1111/poms.13081

Qin, J., Wang, K., Wang, Z., & Xia, L. (2020). Revenue sharing contracts for horizontal capacity sharing under competition. Annals of Operations Research, 291, 731–760. https://doi.org/10.1007/s10479-018-3005-x

Padilla Tinoco, S. V., Creemers, S., & Boute, R. N. (2017). Collaborative shipping under different cost-sharing agreements. European Journal of Operational Research, 263(3), 827–837. https://doi.org/10.1016/j.ejor.2017.05.013

Roels, G., & Tang, C. (2016). Win-win capacity allocation contracts in coproduction and codistribution alliances. Management Science, 63(3), 861–881. https://doi.org/10.1287/mnsc.2015.2358

Seok, H., & Nof, S. (2014). Dynamic coalition reformation for adaptive demand and capacity sharing. International Journal of Production Eco-nomics, 147, 136–146. https://doi.org/10.1016/j.ijpe.2013.09.003

Shao, X. (2020). Capacity sharing: The impacts of agreement and contracting timing. Journal of the Operational Research Society, 72(10), 2256–2273. https://doi.org/10.1080/01605682.2020.1779623

Silva, H., Soares, A., Bettoni, A., Francesco, A., & Albertario, S. (2019). A digital platform architecture to support multi-dimensional surplus ca-pacity sharing. In L. M. Camarinha-Matos, H. Afsarmanesh, & D. Antonelli (Eds.), IFIP Advances in information and communication technol-ogy: Vol. 568. Collaborative networks and digital transformation (pp. 323–334). https://doi.org/10.1007/978-3-030-28464-028

Sun, L., Qiu, J., Han, X., Yin, X., & Dong, Z. (2020). Capacity and energy sharing platform with hybrid energy storage system: An example of hospitality industry. Applied Energy, 280, 115897. https://doi.org/10.1016/j.apenergy.2020.115897

Tao, A. Y., Wang, X. H., & Yang, B. Z. (2018). Duopoly models with a joint capacity constraint. Journal of Economics, 125(2), 159–172. https://doi.org/10.1007/s00712-018-0597-1

Tomaru, Y., Nakamura, Y., & Saito, M. (2011). Strategic managerial delegation in a mixed duopoly with capacity choice: partial delegation or full delegation. Manchester School, 79(4), 811–838. https://doi.org/10.1111/j.1467-9957.2010.02179.x

Ueda, M. (2019). Effect of information asymmetry in Cournot duopoly game with bounded rationality. Applied Mathematics and Computation, 362, 124535. https://doi.org/10.1016/j.amc.2019.06.049

Wei, L., & Zhang, J. (2021). Strategic substitutes or complements? The relationship between capacity sharing and postponement flexibility. Euro-pean Journal of Operational Research, 294(1), 138–148. https://doi.org/10.1016/j.ejor.2021.01.016

Wu, M., & Chang, W. (2007). A short-term capacity trading method for semiconductor fabs with partnership. Expert Systems with Applications, 33(2), 476–483. https://doi.org/10.1016/j.eswa.2006.05.012

Xie, L., & Han, H. (2020). Capacity sharing and capacity investment of environment-friendly manufacturing: Strategy selection and performance analysis. International Journal of Environmental Research and Public Health, 17(16), 5790. https://doi.org/10.3390/ijerph17165790

Yang, F., Shan, F., & Jin, M. (2017). Capacity investment under cost sharing contracts. International Journal of Production Economics, 191, 278–285. https://doi.org/10.1016/j.ijpe.2017.06.009

Yu, Y., Benjaafar, S., & Gerchak, Y. (2015). Capacity sharing and cost allocation among independent firms with congestion. Production and Op-erations Management, 24(8), 1285–1310. https://doi.org/10.1111/poms.12322

Zhang, A., Fu, X., & Yang, H. (2010). Revenue sharing with multiple airlines and airports. Transportation Research Part B: Methodological, 44(8–9), 944–959. https://doi.org/10.1016/j.trb.2010.02.001

Zhao, D., Xue, Y., Cao, C., & Han, H. (2019). Channel selection and pricing decisions considering three charging modes of production capacity sharing platform: A sustainable operations perspective. Sustainability, 11(21), 5913. https://doi.org/10.3390/su11215913

Zhao, D., Han, H., Shang J., & Hao, J. (2020). Decisions and coordination in a capacity sharing supply chain under fixed and quality-based trans-action fee strategies. Computers & Industrial Engineering, 150, 106841. https://doi.org/10.1016/j.cie.2020.106841

Zhao, D., & Han, H. (2020). Decisions and coordination in a capacity sharing supply chain considering production cost misreporting. Complexity, 2020, 1926035. https://doi.org/10.1155/2020/1926035