Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures
© 2019 Production and Operations Management Society We study strategic capacity investment problems in joint ventures (JVs) with fixed-rate revenue-sharing contracts. We adopt a game-theoretical approach to study two types of JVs depending on how individual resources determine the effective capacity...
| Main Authors: | , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2021
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| Online Access: | https://hdl.handle.net/1721.1/136609 |
| _version_ | 1811091478783459328 |
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| author | Levi, Retsef Perakis, Georgia Shi, Cong Sun, Wei |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Levi, Retsef Perakis, Georgia Shi, Cong Sun, Wei |
| author_sort | Levi, Retsef |
| collection | MIT |
| description | © 2019 Production and Operations Management Society We study strategic capacity investment problems in joint ventures (JVs) with fixed-rate revenue-sharing contracts. We adopt a game-theoretical approach to study two types of JVs depending on how individual resources determine the effective capacity of a JV. With complementary resources, the effective capacity of a JV is constrained by the most scarce resource. We show that multiple Nash equilibria could exist. Nevertheless, there exists a unique Strong Nash equilibrium. We show that there is an efficient and fair fixed-rate revenue-sharing contract which induces the system optimal outcome in the Strong Nash equilibrium. On the other hand, with substitutable a resource, the effective capacity of a JV is measured by aggregating individual contributions. We show that there does not exist a fixed-rate revenue-sharing contract that induces the system optimum. We quantify that the efficiency of a JV which decreases with the number of participants, the cost asymmetry and the cost margin of the JV. We propose provably-good fixed-rate revenue-sharing contracts with performance guarantees. We also propose a simple modified contract to achieve the channel coordination. Finally, we fit our model with historical data to shed some insights on two JV examples in the motion picture industry. |
| first_indexed | 2024-09-23T15:03:04Z |
| format | Article |
| id | mit-1721.1/136609 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T15:03:04Z |
| publishDate | 2021 |
| publisher | Wiley |
| record_format | dspace |
| spelling | mit-1721.1/1366092023-12-18T20:04:28Z Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures Levi, Retsef Perakis, Georgia Shi, Cong Sun, Wei Sloan School of Management © 2019 Production and Operations Management Society We study strategic capacity investment problems in joint ventures (JVs) with fixed-rate revenue-sharing contracts. We adopt a game-theoretical approach to study two types of JVs depending on how individual resources determine the effective capacity of a JV. With complementary resources, the effective capacity of a JV is constrained by the most scarce resource. We show that multiple Nash equilibria could exist. Nevertheless, there exists a unique Strong Nash equilibrium. We show that there is an efficient and fair fixed-rate revenue-sharing contract which induces the system optimal outcome in the Strong Nash equilibrium. On the other hand, with substitutable a resource, the effective capacity of a JV is measured by aggregating individual contributions. We show that there does not exist a fixed-rate revenue-sharing contract that induces the system optimum. We quantify that the efficiency of a JV which decreases with the number of participants, the cost asymmetry and the cost margin of the JV. We propose provably-good fixed-rate revenue-sharing contracts with performance guarantees. We also propose a simple modified contract to achieve the channel coordination. Finally, we fit our model with historical data to shed some insights on two JV examples in the motion picture industry. 2021-10-27T20:36:13Z 2021-10-27T20:36:13Z 2020 2021-04-12T18:04:12Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/136609 en 10.1111/POMS.13128 Production and Operations Management Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Wiley SSRN |
| spellingShingle | Levi, Retsef Perakis, Georgia Shi, Cong Sun, Wei Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures |
| title | Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures |
| title_full | Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures |
| title_fullStr | Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures |
| title_full_unstemmed | Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures |
| title_short | Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures |
| title_sort | strategic capacity planning problems in revenue sharing joint ventures |
| url | https://hdl.handle.net/1721.1/136609 |
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