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Open AccessArticle

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

by Wei Liu 1,2,*, Shiji Song 3, Ying Qiao 4 and Han Zhao 3,5
1
Department of Basic Science, Wuhan Donghu University, Wuhan 430212, China
2
Department of Information Engineering, Wuhan Business University, Wuhan 430056, China
3
Department of Automation, Tsinghua University, Beijing 100084, China
4
Financial Department, Wuhan Business University, Wuhan 430056, China
5
Department of Basic Science, Army Logistics University, Chongqing 401311, China
*
Author to whom correspondence should be addressed.
Mathematics 2020, 8(4), 586; https://doi.org/10.3390/math8040586
Received: 22 February 2020 / Revised: 2 April 2020 / Accepted: 6 April 2020 / Published: 16 April 2020
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. View Full-Text
Keywords: loss aversion; Conditional Value-at-Risk; supply chain coordination; contract design loss aversion; Conditional Value-at-Risk; supply chain coordination; contract design
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MDPI and ACS Style

Liu, W.; Song, S.; Qiao, Y.; Zhao, H. Supply Chain Coordination with a Loss-Averse Retailer and Combined Contract. Mathematics 2020, 8, 586.

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