Emergency Quantity Discount Contract with Suppliers Risk Aversion under Stochastic Price

Shuangsheng Wu,Qi Li

doi:10.3390/math9151791

Abstract

This paper constructs an emergency quantity discount contract to explore the inherent law of the contract coordinating the supply chain with stochastic market demand and price and the risk-averse supplier. Meanwhile, the conditional value-at-risk (CVaR) risk measure criterion is revised to study the influence of supplier’s risk aversion attitude on supply chain coordination. The results show that supplier risk aversion will cause the bifurcation of the relevant factors in the supply chain under the stochastic price. Within the bifurcation region, the supply chain cannot be coordinated; out of the bifurcation region, the supply chain can achieve coordination. The supply chain related factors’ variation range in the bifurcation region is related to the step size of the risk aversion factor and the normal distribution function’s variance of the market demand, and it increases with the latter.

Highlights

The use of contracts to coordinate the supply chain is an important research field in the current supply chain management field
The quantity discount contract in this paper refers to an agreement in which the unit wholesale price provided by the supplier is inversely proportional to the retailer’s order quantity
Sun et al [4] investigated the effectiveness of quantity discount contracts in slowing down the spread of bankruptcies among supply chain members

Summary

Introduction

The use of contracts to coordinate the supply chain is an important research field in the current supply chain management field. Analyzing the literature shows that some consider the random changes in market prices caused by emergencies, but the supply chain participants remain risk-neutral. This paper considers whether the supply chain can be effectively coordinated using quantity discount contracts under the simultaneous disturbance of multiple factors such as random market demand, random market prices, and supplier risk aversion. (2) Introduce stochastic price into the field of supply chain risk management and construct an emergency quantity discount contract model under multi-factor disturbance. On this basis, an emergency quantity discount contract model under the condition of stochastic price and supplier risk aversion is further constructed.

Emergency Quantity Discount Contract under the Condition of Stable Price

Emergency Quantity Discount Contract under the Condition of Stochastic Price

Numerical Example

Conclusions