Describe the benefits of sharing risk and reward. Local optimization hurts the supply chain surplus when risk and reward are not shared in a supply chain. Suppliers are more likely to act in a firm’s...

Describe the benefits of sharing risk and reward. Local optimization hurts the supply chain surplus when risk and reward are not shared in a supply chain. Suppliers are more likely to act in a firm’s interest when risk and reward are shared. The use of buyback or revenue sharing is an effective risk sharing mechanism for products like books with low variable costs.