Beyond risk attitude: Unpacking behavioral drivers of supply chain contracts

Abstract

This paper reports on experiments conducted to investigate managers' choice between long-term contract (LTC) and short-term contract (STC) in a two-tier supply chain, accounting for risk and individualism. Results of logistic regression show when market uncertainty elevates, risk-averse individuals prefer STC, which enables more control over order quantity, while risk-tolerant decision-makers prefer LTC. Individualist decision-makers prefer LTC, confirming the positive association between individualism and risk tolerance. LTC selection is less likely to occur when both demand and wholesale price variability increase. Latent Growth Modeling (LGM) highlighted the impact of behavioral drivers on order quantity and its rate of change over time. While high risk tolerance is associated with low initial quantity placement, ‘individualism’ is associated with a high initial quantity. Females placed higher initial quantities and had a decreasing rate of change over time.