Research On Supply Chain Coordination With Buy-back Contract Considering Retailer Innovation Investment

With the deepening of economic globalization, development of informational technologyand the worldwide increasing competition, competition among enterprises has alreadydeveloped into supply chain competition. Technological innovation investment continuouslyimproves the comprehensive competitiveness of enterprises by reducing costs, innovativeproducts and services. The technological innovation investment of individual enterprises willbenefit the entire supply chain. But each companies of supply chain have different evaluationcriteria on their targets, there is a conflict between decisions they made and the whole supplychain profit. The supply chain system need to be coordinated and supply chain contract is themain method of supply chain coordination. Buy-back contract is one of the most commoncontracts of supply chain contract, it plays an important role in supply chain coordination.Therefore, research related to how to coordinate supply chain members through the buy-backcontract and improve the supply chain profit has attracted widespread concerns of scholars.However, traditional studies basically assume that decision makers are fully rational, whichmeans decision makers always maximize their benefits. In real life, people tend to show greatconcern for fairness, which means fairness concerns. Current studies on supply chaincontracts involving fairness concerns behavior are extremely rare.Based on scholars’ numerous studies related to supply chain coordination, this paperconsiders a supply chain consists of a supplier and retailer, discussing the problem of supplychain buy-back contract coordination of retailer innovation investment and FairnessConcerns.Firstly, chapter three studies the supply chain optimal strategies under centralized anddecentralized decision making considering retailer innovation investment. Secondly, chapterfour analyzes the supply chain buy-back contract coordination process. By model calculations,the results show that buy-back contract can achieve perfectly coordination. The wholesaleprice, buyback price and the optimal order quantity of buy-back contract under retailerinnovation investment are greater than the traditional buy-back contract. Further, throughanalysis of examples, the overall profit of supply chain of buy-back contract under retailerinnovation investment is higher than the overall profit of supply chain of traditional buy-backcontract. Finally, chapter five studies the effects that retailer inequity aversion has oncoordination of supply chain by buy-back contract. The results show that the buy-backcontract can coordinate the supply chain and the retailer’s behavior of fairness concerns will not change the state of supply chain coordination. Further, by analysis of numerical examples,it shows that the retailer utility will decrease with the increasing degree of advantageousinequity aversion and disadvantageous inequity aversion. When the retailer utility is below itsultimate utility, the retailer will refuse the buy-back contract provided by the supplier,resulting in the supply chain can achieve coordination.