Revenue sharing model in New Hong Kong’s warehousing business paradigm

The booming e-commerce and fierce regional competition pose challenges to Hong Kong’s warehousing industry, which needs transformation to keep its competitiveness. However, neither of the stakeholders (warehouse owner and user) has the motivation to upgrade, due to high facility investment and short terms of rental agreements. Thus it calls for new business paradigms and incentive mechanisms as a driving force. To address this problem, we first propose a new paradigm in which a third party-warehousing equipment supplier is introduced with their advanced facility and technical capability. The three parties can cooperate with different competences to gain more individual payoffs, via the improved warehousing service and operational efficiency. Then a coordination mechanism between the warehouse owner and warehousing equipment supplier is developed to resolve their conflictions on revenue sharing. Accordingly, we develop a stackelberg game to study stakeholders’ optimal strategies, through first establishing a revenue sharing stackelberg-game model and then finding a unique Nash Equilibrium point in analytical format. The properties and constraints about the revenue sharing model are analysed. Comparatively, we also model a centralized decision-making case when the two parties as a whole make decisions to maximize the overall profit. The two models can be used as references to guide the cooperation and competition of companies.