Supply Chain Coordination With Buyback Contract Considering Loss Aversion

Many researches of prior researchers on supply chain contract were based on thatthe decision subject is risk neutral. This is a kind of ideal mode, so the coordination ofsupply chain often lose efficiency. In the practice, risk the supply chain participantseach have their own risk attitude. Thus, it is necessary to investigate the risk attitudeof the supply chain participants.This article studies the buyback contract for the two-level supply chain with arisk-neutral supplier and a retailer with his own risk attitude. The buyback contract isdivided into two cases, the credit for all unsold goods and the credit for a partial returnof goods. Use commonly used methods of supply chain contract that separatelyresearch objective decision-making of decentralized supply chain system andcentralized supply chain system, and then carry out a comparative analysis to obtainthe conditions in order to achieve perfect coordination of the supply chain.First, the article studies the buyback contract of a supply chain system composed of arisk-neutral supplier and a risk-averse retailer. The buyback contract is divided into two cases, thecredit for all unsold goods and the credit for a partial return of goods, which are theoreticallyanalyzed and simulated numerically respectively. The results show that when the retailer is riskaverse, the supply chain system is able to achieve coordination. The buyback price is an increasingfunction of, and the buyback ratio is also an increasing function of, while the wholesale price is adecreasing function of the risk aversion.Next, the article studies the buyback contract of a supply chain system composed of arisk-neutral supplier and a loss-averse retailer. The buyback contract is divided into two cases, thecredit for all unsold goods and the credit for a partial return of goods, which are theoreticallyanalyzed and simulated numerically respectively. The results show that when the retailer is lossaverse, the supply chain system is able to achieve coordination. The buyback price is an increasingfunction of, and the buyback ratio is also an increasing function of, while the wholesale price is adecreasing function of the loss aversion.Last, the article studies the buyback contract of a supply chain system composed of arisk-neutral supplier and a inventory risk-averse retailer. The buyback contract is divided into twocases, the credit for all unsold goods and the credit for a partial return of goods, which aretheoretically analyzed and simulated numerically respectively. The results show that when the retailer is inventory risk averse, the supply chain system is able to achieve coordination. Thebuyback price is an increasing function of, and the buyback ratio is also an increasing function of,while the wholesale price is a decreasing function of the inventory risk aversion.