THE EFFECT OF RETAILER'S RISK AVERSION ON SUPPLY CHAIN PERFORMANCE UNDER A WHOLESALE PRICE CONTRACT

• Ohmura Shota

  Kobe University

• Matsuo Hirofumi

  Kobe University

Abstract

Tsay (2002) introduced a wholesale price contract model with or without return provision where the risk attitude is represented by the mean-standard deviation value function. In this paper, we focus on a case without return provision where a manufacturer is the Stackelberg leader and a risk-averse retailer reacts. We relax a restriction on the retailer's order size imposed in Tsay (2002). We show that the restriction leads to misleading insights in his paper. We also show that there exist three types of equilibrium outcomes depending on the model parameter values, and one equilibrium type shifts to another as the retailer's risk aversion increases. This causes that a small change in risk aversion might lead to a large change in supply chain coordination. If the retailer is highly risk averse, then the manufacturer might consider substantially reducing the wholesale price to induce a much greater supply chain wide expected profit.

Journal

• The Journal of Japanese Operations Management and Strategy

  The Journal of Japanese Operations Management and Strategy 3 (1), 1-17, 2012

  Japanese Operations Management and Strategy Association

Keywords

• supply chain coordination
• risk aversion
• mean-standard deviation value function

Details

• CRID: 1390282680397337600
• NII Article ID: 130005878510
• DOI: 10.20586/joms.3.1_1
• ISSN: 24241563
• ISSN: 18846939
• NDL BIB ID: 023809727
• Web Site: http://id.ndl.go.jp/bib/023809727
• Web Site: https://ndlsearch.ndl.go.jp/books/R000000004-I023809727
• Text Lang: en
• Data Source:
  • JaLC
  • NDL
  • CiNii Articles
• Abstract License Flag: Disallowed