scholarly journals Coordinating a Supply Chain with a Loss-Averse Retailer under Yield and Demand Uncertainties

2016 ◽  
Vol 2016 ◽  
pp. 1-12 ◽  
Author(s):  
Weiwei Luo ◽  
Dongguo Shao ◽  
Wei Liu ◽  
Zhuomin Wang
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Wholesale Price ◽  
Risk Preference ◽  
Channel Coordination ◽  
Random Yield ◽  
Pareto Improvement ◽  
Risk Neutral ◽  
Quantity Flexibility ◽  
A Chain

This paper investigates the channel coordination of a supply chain (SC) consisting of a loss-averse retailer and a risk-neutral supplier under yield and demand uncertainties. Three existing contracts are analyzed. Our results demonstrate that the buyback (BB) and quantity flexibility (QF) contracts can not only coordinate the supply chain but also lead to Pareto improvement for each player, while the wholesale price (WP) contract fails to coordinate the chain due to the effects of double marginalization and risk preference. For comparison, a chain with a risk-neutral retailer is also analyzed. Furthermore, numerical examples are provided to demonstrate the effectiveness of the coordination contracts, and the impacts of loss aversion and random yield on the decision-making behaviors and system performance are then discussed.

scholarly journals Supply Chain Coordination with a Loss-Averse Retailer and Combined Contract

Mathematics ◽  
2020 ◽  
Vol 8 (4) ◽  
pp. 586
Author(s):  
Wei Liu ◽  
Shiji Song ◽  
Ying Qiao ◽  
Han Zhao
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Value At Risk ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Confidence Levels ◽  
Quantity Flexibility ◽  
Quantity Flexibility Contract

This paper studies the supply chain coordination where the retailer is loss-averse, and a combined buyback and quantity flexibility contract is introduced. The loss-averse retailer’s objective is to maximize the Conditional Value-at-Risk of utility. It is shown the combined contract can coordinate the chain and a unique coordinating wholesale price exists if the confidence level is below a threshold. Moreover, the retailer’s optimal order quantity, expected utility and coordinating wholesale price are decreasing in loss aversion and confidence levels, respectively. We also find that when the contract parameters are restricted, the combined contract may coordinate the supply chain even though neither of its component contracts coordinate the chain.

scholarly journals Coordination of a Random Yield Supply Chain with a Loss-Averse Supplier

2015 ◽  
Vol 2015 ◽  
pp. 1-11 ◽  
Author(s):  
Jiarong Luo ◽  
Xu Chen
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Optimal Order ◽  
Random Yield ◽  
Order Quantity ◽  
Optimal Production ◽  
Numerical Examples ◽  
Risk Neutral ◽  
Production Quantity ◽  
Optimal Order Quantity

This paper investigates the coordination of a supply chain consisting of a loss-averse supplier and a risk-neutral buyer who orders products from the supplier who suffers from random yield to meet a deterministic demand. We derive the risk-neutral buyer’s optimal order policy and the loss-averse supplier’s optimal production policy under shortage-penalty-surplus-subsidy (SPSS) contracts. We also analyze the impacts of loss aversion on the loss-averse supplier’s production decision making and find that the loss-averse supplier may produce less than, equal to, or more than the risk-neutral supplier. Then, we provide explicit conditions on which the random yield supply chain with a loss-averse supplier can be coordinated under SPSS contracts. Finally, adopting numerical examples, we find that when the shortage penalty is low, the buyer’s optimal order quantity will increase, while the supplier’s optimal production quantity will first decrease and then increase as the loss aversion level increases. When the shortage penalty is high, the buyer’s optimal order quantity will decrease but the supplier’s optimal production quantity will always increase as the loss aversion level increases. Furthermore, the numerical examples provide strong evidence for the view that SPSS contracts can effectively improve the performance of the whole supply chain.

scholarly journals Fresh-Keeping Effort and Channel Performance in a Fresh Product Supply Chain with Loss-Averse Consumers’ Returns

2018 ◽  
Vol 2018 ◽  
pp. 1-20 ◽  
Author(s):  
Bojun Gu ◽  
Yufang Fu ◽  
Yanling Li
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Cost Sharing ◽  
Numerical Study ◽  
Wholesale Price ◽  
Channel Coordination ◽  
Return Policy ◽  
Numerical Studies ◽  
Buyback Contract ◽  
Fresh Products

We consider a fresh product supply chain consisting of one fresh product supplier and one e-tailer. Supplier sells fresh products through e-tailer in an online market, and the e-tailer offers a full-refund return policy to loss-averse consumers and exerts a fresh-keeping effort to keep the product at the optimum freshness level. By developing an analytical model, we derive the optimal price, quantity, and fresh-keeping effort jointly and verify that it is unique in the centralized setting. Based on the comparison, we demonstrate that the e-tailer’s profit is greater with fresh-keeping effort than without it; therefore, the e-tailer has an incentive to engage in fresh-keeping effort. We also show that the return rate is independent of the fresh-keeping effort and consumers’ loss aversion. In the decentralized setting, we first characterize the optimal wholesale price by the numerical study and then find that although the buyback contract still works, the revenue-sharing contract fails to achieve channel coordination under our model formulation. Furthermore, we develop a revenue- and cost-sharing contract that can coordinate the supply chain by designing a new contractual mechanism. Our numerical studies offer the Pareto improvement regions under the buyback and revenue- and cost-sharing contracts in which the supplier and e-tailer can earn more expected profits compared with being under wholesale price contract.

scholarly journals Coordinating a Supply Chain with a Loss-Averse Retailer and Effort Dependent Demand

2014 ◽  
Vol 2014 ◽  
pp. 1-12 ◽  
Author(s):  
Liying Li ◽  
Yong Wang
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Loss Aversion ◽  
Special Class ◽  
Numerical Study ◽  
Supply Chain Performance ◽  
Channel Coordination ◽  
Gain Loss ◽  
Decision Making Behavior ◽  
Dependent Demand

This study investigates the channel coordination issue of a supply chain with a risk-neutral manufacturer and a loss-averse retailer facing stochastic demand that is sensitive to sales effort. Under the loss-averse newsvendor setting, a distribution-free gain/loss-sharing-and-buyback (GLB) contract has been shown to be able to coordinate the supply chain. However, we find that a GLB contract remains ineffective in managing the supply chain when retailer sales efforts influence the demand. To effectively coordinate the channel, we propose to combine a GLB contract with sales rebate and penalty (SRP) contract. In addition, we discover a special class of gain/loss contracts that can coordinate the supply chain and arbitrarily allocate the expected supply chain profit between the manufacturer and the retailer. We then analyze the effect of loss aversion on the retailer’s decision-making behavior and supply chain performance. Finally, we perform a numerical study to illustrate the findings and gain additional insights.

Coordination and Decision of Supply Chain Under

2019 ◽  
Vol 12 (3) ◽  
pp. 21-46 ◽  
Author(s):  
Guangdong Liu ◽  
Tianjian Yang ◽  
Yao Wei ◽  
Xuemei Zhang
Keyword(s):  
Supply Chain ◽  
Numerical Analysis ◽  
Cost Sharing ◽  
Supply Chain Coordination ◽  
Pareto Improvement ◽  
Optimal Price ◽  
Decentralized System ◽  
Risk Neutral ◽  
Future Work ◽  
Dependent Demand

In order to investigate supply chain coordination and decision under customer balking and stochastic demand, the article considers a two-echelon supply chain consisting of one manufacturer with risk-neutral and one retailer with risk-neutral and develops two models in a centralized and a decentralized system and the three contracts are designed to coordinate supply chain and the optimal price and customer balking strategies are obtained. The results show that the revenue and cost-sharing contract can coordinate supply chain under customer balking and price-dependent demand and achieve the Pareto-improvement; the expected sales quantity and expected reduced sales quantity are influenced conversely by the threshold of inventory and probability of a sale under customer balking. In addition, numerical analysis is given to verify the effectiveness of revenue and cost-sharing contract and the paper gives some managerial insights and puts forward to the future work at last.

scholarly journals Coordinating Contracts for Two-Stage Fashion Supply Chain with Risk-Averse Retailer and Price-Dependent Demand

2013 ◽  
Vol 2013 ◽  
pp. 1-12 ◽  
Author(s):  
Minli Xu ◽  
Qiao Wang ◽  
Linhan Ouyang
Keyword(s):  
Supply Chain ◽  
Supply Chain Coordination ◽  
Revenue Sharing ◽  
Channel Coordination ◽  
Risk Averse ◽  
Revenue Sharing Contract ◽  
Risk Neutral ◽  
Mean Variance ◽  
Variance Approach ◽  
Dependent Demand

When the demand is sensitive to retail price, revenue sharing contract and two-part tariff contract have been shown to be able to coordinate supply chains with risk neutral agents. We extend the previous studies to consider a risk-averse retailer in a two-echelon fashion supply chain. Based on the classic mean-variance approach in finance, the issue of channel coordination in a fashion supply chain with risk-averse retailer and price-dependent demand is investigated. We propose both single contracts and joint contracts to achieve supply chain coordination. We find that the coordinating revenue sharing contract and two-part tariff contract in the supply chain with risk neutral agents are still useful to coordinate the supply chain taking into account the degree of risk aversion of fashion retailer, whereas a more complex sales rebate and penalty (SRP) contract fails to do so. When using combined contracts to coordinate the supply chain, we demonstrate that only revenue sharing with two-part tariff contract can coordinate the fashion supply chain. The optimal conditions for contract parameters to achieve channel coordination are determined. Numerical analysis is presented to supplement the results and more insights are gained.

scholarly journals Green Supply Chain Management with Nash Bargaining Loss-Averse Reference Dependence

Mathematics ◽  
2021 ◽  
Vol 9 (24) ◽  
pp. 3154
Author(s):  
Wentao Yi ◽  
Zhongwei Feng ◽  
Chunqiao Tan ◽  
Yuzhong Yang
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Reference Point ◽  
Wholesale Price ◽  
Optimal Strategies ◽  
Retail Price ◽  
Nash Bargaining ◽  
Green Supply Chain ◽  
Bargaining Solution ◽  
Efficiency Coefficient

This paper investigates a two-echelon green supply chain (GSC) with a single loss-averse manufacturer and a single loss-averse retailer. Since the Nash bargaining solution exactly characterizes endogenous power and the contribution of the GSC members, it is introduced as the loss-averse reference point for the GSC members. Based on this, a decision model of the two-echelon GSC with loss aversion is formulated. The optimal strategies of price and product green degree are derived in four scenarios: (a) the centralized decision scenario with rational GSC members, namely the CD scenario; (b) the decentralized decision scenario with rational GSC members, namely the DD scenario; (c) the decentralized decision scenario with the GSC members loss-averse, where the manufacturer’s share is below its own loss-averse reference point, namely the DD(∆m ≥ πm) scenario; (d) the decentralized decision scenario with the GSC members loss-averse, where the retailer’s share is below its own loss-averse reference point, namely the DD(∆r ≥ πr) scenario. Then, a comparative analysis of the optimal strategies and profits in these four scenarios is conducted, and the impacts of loss aversion and green efficiency coefficient of products (GECP) on the GSC are also performed. The results show that (i) GECP has a critical influence on the retail price and the wholesale price; (ii) the GSC with loss aversion provide green products with the lowest green degree; (iii) the retail price, the wholesale price and product green degree are decreasing monotonically with the loss aversion level of the GSC member without incurring loss; (iv) furthermore, the effect of the loss aversion level of the GSC member with incurring loss on the optimal strategies is related to GECP and the gap between the GSC members’ loss aversion levels.

scholarly journals The role of retailer's app channel in a supply chain with quality decision and different power structures

2020 ◽  
Author(s):  
Musen Xue
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Power Structure ◽  
Theoretic Approach ◽  
Power Structures ◽  
Pareto Improvement ◽  
Game Theoretic ◽  
Quality Decision ◽  
Game Theoretic Approach

The role of retailer's ability to add app channel in a supply chain with quality decision and different power structures is investigated in this paper. Applying a game-theoretic approach, we find that, first, under certain conditions, retailer's ability to add app channel can induce the manufacturer to adjust the wholesale price and product quality in the opposite direction with the manufacturer being the leader. Second, for the manufacturer and the retailer, retailer's ability to add app channel can result in two distinct profit situations regardless of the power structure of supply chain: win-win and lose-win. Moreover, in a retailer-led supply chain, adding app channel will make the whole supply chain better off when the return cost is relatively low or high, while make the whole supply chain worse off when the return cost is moderate. Third, we identify a region of the return cost under which the manufacturer, the retailer, the supply chain and consumers can gain from adding app channel, leading to a Pareto improvement.

Coordinating Vulnerable Supply Chains with Option Contracts

2021 ◽  
pp. 2050053
Author(s):  
Zhongyi Liu ◽  
Shengya Hua ◽  
Guanying Wang
Keyword(s):  
Supply Chain ◽  
Risk Aversion ◽  
Value At Risk ◽  
Numerical Study ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
Conditional Value At Risk ◽  
Option Contract ◽  
Risk Neutral ◽  
Disruption Risk

We investigate vulnerable supply chain coordination with an option contract in the presence of supply chain disruption risk caused by external and internal disturbances. The supply chain consists of a single risk-neutral supplier and a risk-averse retailer. We characterize the retailer’s order quantity decision under the Conditional Value-at-Risk (CVaR) criterion and the supplier’s production decision. The results show that facing disruption risk and risk-aversion, both the retailer and the supplier would be more prudent to order and produce less than the risk-neutral scenario, inducing damage to the supply chain performance. The number of options purchased is decreasing in disruption risk and the risk-aversion of the retailer. The supplier will increase production as the disruption risk decreases or the shortage penalty increases. When the supplier does not know the risk-aversion of the retailer, the former will produce more and bear a higher overstock risk. We also investigate conditions that facilitate vulnerable supply chain coordination and find that the existence of risk-aversion and disruption risk restrict the option price and exercise price to lower price levels. Finally, we compare the option contract with wholesale price contract from the supplier’s and retailer’s perspectives through a numerical study.

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