Contract On The Behavioral Factors Retailer Profit Sharing

As the arrival of the economic globalization, the competition among corporations has becoming increasingly fierce. Supply chain competition has gradually begun to be a efficient model of putting corporations into market competition. Moreover, coordination of supply chain is one of the most significant tasks in management of supply chain. In supply chain, a corporation is a entity gaining independent economic benefit. Maximization of the corporation’s benefit is unequal to obtain a whole optimization of the supply chain. In recent years, more and more scholars have started to be concerned about the effect of human behaviors on supply chain decisions which is mainly reflected in four aspects:bounded rationality, risk attitude, decision-making bias and social preference. Decision-maker will express different attitude towards risk in different circumstance of real life, and different corporation has disparate business ideas and social preference. To be specific, it manifests as fairness concern. Related study shows that supply chain decision will be inevitably influenced by the risk attitude of decision-maker and fairness concern behavior.Based on a two-stage supply chain system which consists of a supplier dominated and a retailer, this article built a coordination model of profit-sharing contract. It firstly considered the coordination condition of profit-sharing contract in the situation that both risk attitude and fairness concern of the retailer are neutral. When the profit-sharing coefficient satisfies certain conditions, the profit-sharing contract will coordinate the supply chain. However, the specific numerical results have to be confirmed by the negotiation skills of the supplier and the retailer. Secondly, we considered the coordination situation of the profit-sharing contract when the retailer is a risk averter. Moreover, we found the profit-sharing contract will achieve the coordination when the originated coefficient of share could make the retailer’s profit variance satisfy the risk constraints, and the coefficient of share has to be reset to make the supply chain coordinate when the originated one could not make the retailer’s profit variance satisfy the risk constraints. The coordination situation of the profit-sharing contract will change when the retailer is a loss averter. When the retailer is fairness concerning, the optimal wholesale prices of the supply chain is unlikely to be related to the fairness concern degree of the retailer, and the profit the retailer obtain from the supply chain will go up as the increase of the fairness concern degree of the retailer. Simultaneously, the profit of the supplier will decrease. Finally, we considered the coordination situation of the profit-sharing contract when the retailer has both characters of fairness concern and loss aversion. By changing the different influence forms of two behavioral factors on the profit-sharing contract, we could find that fairness concern behavior could ameliorate the affection of the loss aversion behavior on supply chain decision. Moreover, the amelioration of the fairness concern behavior is not obvious when the retailer is a severe loss averter.