Capital-Constrained Retailer Ordering Decision Based On Prospect Theory

With the improvement of the supply chain management system,the risk of any one of the participants in the supply chain may affect the stability of the supply chain as a whole.For SMEs in the supply chain,the lack of operating funds is an important factor affecting the stability of the supply chain.Providing safe and reliable financing channels has always been the focus of the government,supply chain core enterprises and academic circles.In this paper,we will explore the order decision problem of retailers with financial constraints as a simple supply chain consisting of a supplier and a consortium with capital constraints.For retailers with financial constraints in the supply chain,there are mainly two types of financing methods:bank credit and trade credit.For any financing method,the retailer's order decision research is usually analyzed under the framework of expected utility theory.of.Relevant research shows that because retailers objectively have different behavioral characteristics and subjectively there may be behaviors that deceive suppliers.Therefore,the actual order quantity of retailers may differ from the theoretical optimal order quantity,and relevant Commercial practice and empirical research have shown that the actual order quantity of a retailer is usually less than the optimal order quantity when the expected return is maximized.This phenomenon indicates that the expected return indicator cannot accurately describe the way in which financial constraints constrain retailers decide.In the supply chain without considering the financial constraints,the phenomenon that the actual order quantity of the retailer does not match the theoretical optimal order quantity also exists,and this deviation is well corrected by introducing the prospect theory.Therefore,under the framework of the prospect theory,the research on the order decision of the capital-constrained retailer is of great significance to the decision-making of the supplier's inventory and pricing.In this paper,we will combine the research content and research hypothesis of this paper,focusing on the loss avoidance effect and the reference dependence effect in the foreground theory to determine the retailer's utility function.On this basis,different credit methods are respectively adopted.The ordering decision of the retailer is analyzed and compared with the theoretical optimal order quantity;in addition,the retailer's own funds,reference coefficients and other parameters introduced in the utility function constructed under the foreground theory framework are ordered to the retailer.The impact of decision-making was studied;then,changes in supply chain performance due to changes in retailer order quantities were studied,and the distribution of changes in supply chain performance among suppliers and retailers was analyzed;Finally,a comparative study is conducted on the supplier's interest rate making decision and the retailer's credit method selection and ordering decision when both credit methods exist simultaneously.After analyzing the above theoretical model,the following conclusions are verified by designing relevant examples,and combined with examples,reasonable suggestions for increasing supply chain performance are proposed.The main research contents and corresponding conclusions of this paper are:When only a credit method of bank credit or trade credit is available for the constrained retailer to choose,the order quantity of the retailer in the decision theory framework is smaller than the retailer's theoretical optimal order quantity;and the capital constrains the order quantity of the retailer.It is negatively related to its own funds and reference factors.In addition,for the loss of supply chain performance caused by the reduction of order quantity,the ratio of the supplier's loss is more important than the proportion of the shared income when a unit of goods is successfully sold.When both bank credit and trade credit are available to constrained retailers,this paper concludes that suppliers should maintain their trade credit wholesale prices unchanged,allowing retailers to choose bank credit to be more favorable to suppliers.For the improvement of supply chain performance,combined with the results of the analysis of the example,the supplier can adjust the wholesale price according to the characteristics of different retailers to improve the performance of the supply chain.When the retailer's own fund level and reference factor are higher,the supplier's appropriate reduction of the wholesale price can increase its expected return.Otherwise,the supplier's appropriate increase in the wholesale price can increase the expected return;when only trade credit is available When the capital constraint retailer chooses,if the retailer's own fund level and reference factor are high,the supplier's appropriate reduction of the wholesale price can increase the expected return,when the fund constrains the retailer's own fund level and the expected return on net assets.At a lower price,the supplier's best strategy should be to keep the original wholesale price unchanged.