Suply Chain Contracts Considering Fairness Preference And Loss Aversion

The traditional supply chain management are based on assumptions supply chain members which only have a strong preference for self-interest. But more supply chain management study are studied, scholars find that people not only consider self-interested preference, but also consider other behavioral preferences. Loss aversion and fairness preference are two widespread preferences of the members of supply chain. Loss aversion means that people always strongly averse loss. When the members of supply chain make decisions,maxing their interests is the target. And fairness preference means people in the real world are great concerned with fairness. When people with fairness preference make decisions, maximizing the overall efficiency is no longer the objective of the decision-maker. So the paper considers the retailer has behavioral of loss aversion and fairness preference and analyzes the effect of two acts of retailer on optimal decisions and coordination for retailer and supplier. This paper has three main parts.The first part, we use the model of buy-back contract to study the behavior of the numbers of supply chain on the basis of the buy-back contract, analyzing the influence of the loss aversion of retailer and the fairness preference of retailer on the optimal order quantity of the retailer and the supply chain. This section focuses on the third chapter. And, studies have shown that when retailer considers the behavior of loss aversion and fairness preference, buy-back contract can coordinate supply chain; the greater the retailer’s loss aversion, the smaller the optimal order quantity of the retailer and the supply chain system and the change tendency of the retailer is more obvious than that of the supply chain; the greater the retailer’s loss aversion, how to change the optimal order quantity of the retailer and the supply chain depends on the size of repurchase costs, and the change tendency of the retailer is more obvious than that of the supply chain. Then, we make the sensitivity analysis of the wholesale price, the retail price, the manufacturing cost of supplier and repurchase costs.The second part, we use the model of revenue sharing contract to study the behavior of the number of supply chain on the basis of the revenue sharing contract, analyzing the influence of the loss aversion of retailer and the fairness preference of retailer on the optimal order quantity of the retailer and the supply chain. This section focuses on the fourth chapter. And, Studies have shown that when retailer considers the behavior of loss aversion and fairness preference, revenue sharing contract can coordinate supply chain; the greater the retailer’s loss aversion, the smaller the optimal order quantity of the retailer and the supply chain system and the change tendency of the retailer is more obvious than that of the supply chain; the greater the retailer’s loss aversion, how to change the optimal order quantity of the retailer and the supply chain depends on the size of the share of retained earnings of the retailer, and the change tendency of the retailer is more obvious than that of the supply chain. Then, we make the sensitivity analysis of the wholesale price, the retail price, the manufacturing cost of supplier and the retailer’s share of retained earnings.The third part, we analyses and contrast the research findings of research findings of the buy-back contract and the revenue sharing contract. This part of the study focuses on fifth chapter. Firstly, we analyse and contrast coordination mechanism of the buy-back contract and the revenue sharing contract, and get general conclusions that when retailer considers the behavior of loss aversion and fairness preference, the coordination of supply chain can be achieved; the coordination of supply chain can be achieved by balance the profit of the members of supply chain; when certain conditions are met, buyback contract is equivalent to revenue sharing contract; when the supply chain can achieve coordination, the profit of retailer and supply chain is less than the profits of the traditional conditions. Then we analyse and contrast the effects of various parameters on the optimal order quantity under the buy-back contract and the revenue sharing contract.The paper combines the traditional studies of chain contract and the behavior of loss aversion and fairness preference. On the one hand,it enrichs and improves the traditional supply chain contract theory, on the other hand, it guides the supply chain members and supply chain decision-makers make optimal decision when facing the behavior of loss aversion and fairness preference.