Research On Markdown Allowance Contract With Loss Averse Decision Maker

With the advancement of technology and market competition intensifing, enterprises get more development opportunities while facing an unprecedented uncertainty. With more and more products become to have the characteristics of perishable goods, perishable product supply chain management becomes an important frontier issues in supply chain management. In the perishable product supply chain management, the risk decision makers are concerned from the scholars for the reason that the acts of risk decision makers more truly reflect the actual behavior in real life than the acts of the risk-neutral decision makers.How to characterize the decision maker'risk level and analyze the optimal strategy of risk decision makers are the hot issues in the supply chain contract designing. We characterize the decision makers'risk level by applying the prospect theory. The aim of our study is to investigate the optimal strategy of decision makers under the condition of a-supplier-a-retailer, a-supplier-multi-retailers, information asymmetry, and strategic customer being the end of the supply chain, design the markdown allowance contract. The numerical example analysis has further confirmed the validity of the markdown allowance contract.First, we study the a-supplier-a-retailer single-product supply chain whose leader is the supplier, analyze the decision makers'optimal strategy under different combinations of loss-averse level, and then design the markdown allowance contract. We find the retailer reveals her loss-averse level through her order and the supplier shows his loss-averse level through the contract. The results are proved that the optimal retailer order quantity under the wholesale price contract maybe less than that of the centralized supply chain and that the supplier can coordinate the decentralized supply chain by the markdown allowance contract.Based on these above studies, retailer number is extended to more than one competing retailers. We analyze the decision makers'optimal strategy with different combinations of loss-averse level, and then design the markdown allowance contract. The results are proved that the optimal retailer order quantity under the wholesale price contract maybe less than that of the centralized supply chain and that the supplier can coordinate the decentralized supply chain by the markdown allowance contract. The numerical examples also show that the retailer will benefit from the number of retailer increasing under the wholesale price contract and the markdown allowance contract and that the supplier maybe decrease the number of retailer under the markdown allowance contract.Then, we analyze the decision makers'optimal strategy with different combinations of loss-averse level under information asymmetry when the supply chain is composed of a retailer and a supplier being the supplier, and then design the markdown allowance contract. We prove that the supplier can not coordinate the decentralized supply chain by the markdown allowance contract and that the retailer obtains the greater income from the supplier under information asymmetry than under the information symmetry and that the supplier has desire to eliminate the information asymmetry between the supplier and the retailer.Lastly, we study the strategic customer being the end of the single-product supply chain composed of a leader supplier and a follower retailer. We begin to analyzes the retailer's optimal pricing and order behavior facing the strategic customer, and then analyzes what impact of the consumer utility have on the decision makers'optimal strategy with different combinations of loss-averse level. The results show that the wholesale price contract can not be used to coordinate the retailer's optimal order quantity while the markdown allowance contract can be when the customer is strategic. The numerical example analysis also confirmed the expectations utility of retailer and supplier increase with the consumer utility increaseing.