Advance payment plays an important role in both domestic and international transactions. In order to find out the influence of the advance payment on the product quality and the retailer?s moral hazard, an agency model is explored in the research. The results show that, the advance payment can mitigate the moral hazard of the retailer and can improve the product quality, but can?t make them optimal. By the way, conditions for advance payment are listed, which is referred to the opportunity cost margins of the supplier and the retailer. At last, a revenue sharing contract with advance payment is given to coordinate the supply chain.
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