Market Development and Revenue-Sharing Contract Design for Mobile Game Supply Chains

This article investigates the optimal market development and revenue-sharing contract design for free-to-play games with premium subscription in a supply chain. The mobile game supply chain comprises a mobile game developer and a game distribution platform. The distribution platform and the developer share sales revenue and product development cost. In the optimization model, we incorporate both free mode demand and purchase mode demand for mobile games. We derive the optimal decisions, including the developer's quality effort and time-to-market effort and the distribution platform's revenue share and cost share. We find that the pricing decision shows stochastic dominance. This property can explain why the price of some mobile games is stable. In addition, the analyses show that the efforts for product quality and time-to-market are highly related to the sensitivity of the market demand. The overall performance of the mobile game supply chain relies on the distribution platform's revenue-sharing and cost-sharing decisions. In addition, based on the Nash bargaining process, the distribution platform can design revenue-sharing contract parameters to achieve supply chain coordination.