Stackelberg game of buyback policy in supply chain with a risk-averse retailer and a risk-averse supplier based on CVaR.

Yanju Zhou,Zongrun Wang,Qian Chen,Xiaohong Chen,Pablo Brañas-Garza

doi:10.1371/journal.pone.0104576

Abstract

This paper considers a decentralized supply chain in which a single supplier sells a perishable product to a single retailer facing uncertain demand. We assume that the supplier and the retailer are both risk averse and utilize Conditional Value at Risk (CVaR), a risk measure method which is popularized in financial risk management, to estimate their risk attitude. We establish a buyback policy model based on Stackelberg game theory under considering supply chain members' risk preference and get the expressions of the supplier's optimal repurchase price and the retailer's optimal order quantity which are compared with those under risk neutral case. Finally, a numerical example is applied to simulate that model and prove related conclusions.

Highlights

In the demand uncertain setting, buyback policy is often adopted by the supplier to encourage the retailer to order more products
Literature [15] led the assumption of risk preference to the research framework of buyback policy and discussed the case of a risk-averse supplier and a risk preference retailer, as well as the case of a risk preference supplier and a risk-averse retailer
We put the supplier’s optimal buyback price and the supply chain’s optimal order quantity from the Table 1 and Table 2 into the equations (10), (16) and (18), and we can obtain the Conditional Value at Risk (CVaR) values of the retailer, the supplier and the supply chain respectively

Summary

Introduction

In the demand uncertain setting, buyback policy is often adopted by the supplier to encourage the retailer to order more products. (x), F {1(1{b2)ƒxvF {1(1{b1) ; x§F {1(1{b1): we can obtain the supply chain’s optimal order quantity xÃsc under the condition of xvF {1(1{b2), and it is proved that this is a feasible solution. We can obtain the optimal buyback price expression of the supplier by making the retailer’s optimal order quantity equal to the supply chain’s.

Results

Conclusion