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| Revenue-sharing Contract Design for Vertical Collaborative New Product
Development with Complementary Efforts |
| LAI Xianghong,WANG Wenping |
| 1. Southeast University, Nanjing, China;
2. Nanjing University of Information Science & Technology, Nanjing, China |
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Abstract The relationship between the efforts of two partners in new product development can be assumed as complementation or substitution, which has an important affect on design of the incentive contract. The paper discusses the design of revenuesharing contract in vertically collaborative new product development under the premise of complementary efforts. The analysis shows that: if two partners’ inputoutput efficiencies have great disparity, the partner with higher one should undertake all the tasks of new product development alone; if two partners develop a new product jointly, revenuesharing contract can regulate partners’ efforts effectively; the optimal revenuesharing ratio in the contract locates between two different revenuesharing ratio at which the two partners’ efforts can reach their respective maximums; and it does not rely on development costs, market risk, etc., but depends on two partners’ efforts elasticity, at the same time, the partner with higher effort elasticity has more share of profits, and fiftyfifty if they have the same effort elasticity.
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Received: 24 February 2012
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2013, Vol. 10 
