Online Gaming Industry Supply Chain Coordination With Contracts

A supply chain is made up of two or more parties with different benefits. Optimal supply chain performance requires the execution of a precise set of actions. Unfortunately, those actions are not always in the best interest of the members in the supply chain because the supply chain members are primarily concerned with optimizing their own objectives. So supply chain is a typical system that needs to be coordinated.However, all the trade-offs among the firms in supply chain are fulfilled by contracts, so all the means that help to achieve coordination will be restricted by contracts. Supply chain contract is a coordination mechanism that provides incentives to all members so that the decentralized supply chain behaves as nearly or exactly the same as the integrated one.Firstly, this paper surveys typical supply chain contracts and points out the present researches on supply chain contracts designed for tangible traditional products have not considered the characteristic of intangible products such as online game industry. Secondly, the members and operational situations of the supply chain are explored in online game industry. Thirdly, the paper provides a new supply chain contract model for online game industry under thoughts of the existed contracts models. At last, a mathematical example is provided, the profits for the whole supply chain and the profits for every member have been compared with between in the new contract model and in the old contract model, and the results shows the new contract model is better.