Abstract
In this paper, we propose a supply chain contract model aimed to coordinate a three-echelon supply chain, which is based on the revenue-sharing allocation with loss-aversion preference. We consider a three-echelon supply chain consisting of a risk-neutral manufacturer, a risk-neutral distributor, and loss-averse multiple retailers. To address this model, we consider a shortage product produced and sold within a single period in the stochastic market. The model allows the system efficiency to be achieved as well as it will improve the profits of all supply chain members by tuning the contract parameters. We used the expected utility function to describe the loss-aversion member’s influence coefficient. The decisions of chain members under different conditions are studied by simulation analyses. The paper also analysed the relationship between different revenue-sharing coefficient combinations with multiple retailers in the supply chain system. Furthermore, the study has addressed the supply chain coordination decision bias in the centralized and decentralized systems.
Highlights
Majorities of supply chain (SC) management literatures have mainly focused on SC coordination with two-stage leaderfollower member’s game theory. e SC members decisionmaking behaviours’ efficiency analysed, identified, and compared with the centralized system control. e centralized control assures the system efficiency
We consider a three-echelon sustainable SC consisting of a risk-neutral manufacturer, a risk-neutral distributor, and multiple loss-averse retailers, in which a single-period product is produced and sold under stochastic market demand. e retailer provides RS contract and shares profit quota with the distributor and manufacturer. e retailer uses a newsboy type of commodity and orders according to the demand forecast before the selling season. e distributor orders the shortage product from the manufacturer according to the retailer’s order, and the manufacturer produces according to the order quantity of distributor
E market demand function is calculated by the following equation: x bp− k + ε, (b > 0, k ≥ 1)
Summary
Majorities of supply chain (SC) management literatures have mainly focused on SC coordination with two-stage leaderfollower member’s game theory. e SC members decisionmaking behaviours’ efficiency analysed, identified, and compared with the centralized system control. e centralized control assures the system efficiency. Few authors have applied gain-loss prospect theory through SC contractual coordination such as wholesale price contract [20], buy-back contract [21], option contract [22], and revenue-sharing (RS) contracts on which other types of contract models are based. He and Zhao [20] studied the inventory, production, and contracting decisions of a multiechelon SC with both demand and supply uncertainty. E paper shows that the retailer and the manufacturer can be coordinated by the RS contract, in which they obtain the same total expected utilities as the centralized decisionmaking system Most of these studies considered the problem of SC coordination with two stages.
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