Abstract In a two-stage supply chain, the supplier and retailer are equal in market power. The supplier hides its information about production cost and the retailer hides its action about sales effort, which results in low efficiency of supply chain operation. To cope with this problem, a virtualthird party is introduced to represent the whole interests of the supply chain as coordination main body. The virtualthird party realizes centralized control, profits distribution and double incentives. Main results reveal that compared to the situation in the retailerled supply chain, only when the revenue sharing ratio and cost sharing proportion satisfies the more stringent constraint, the supply chain coordination could be achieved. However, because the virtual thirdparty admits the supplier’s information rent, it made decision on how many times of the whole supply chain’s expected profit. Finally, the study results are illustrated by a numerical example.
2013, Vol. 10 
