Operation Decisions In The Two-echelon Supply Chain With Time Inconsistent Preference

Although the researches on supply chain are sufficient, and more and more scholars study the supply chain with behavioral decisions and management experiments, there are few discusses about the effect of time inconsistent preference on the decisions and the performance of the supply chain in the interface between time inconsistent preference and supply chain. Therefore, we consider a two-echelon supply chain in which a supplier distributes a product to a retailer. Moreover, we use the hyperbolic discounting model to figure the member’s time inconsistent preference. We first characterize the optimal solution to the centralized system, but also discuss the effect of the time inconsistent preference on the second pricing. We then proceed with the decentralized system. Here, the supplier chooses a wholesale price contract, and the retailer responds to this contract choosing order quantity and retail price. We distinguish systematically the cases whether the supplier knows the time inconsistent preference of the retailer. By applying sensitivity analysis method, we explore the effect of the time inconsistent preference on the decisions and the performance of the supply chain. Furthermore, by comparing the numerical results of different models, we find quantificationally some conclusions, and analyze the extent of the effects of the time inconsistent preference in different cases.