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Article

Coping with Loss Aversion and Risk Management in the Supply Chain Coordination

1
Department of Basic Science, Wuhan Donghu University, Wuhan 430212, China
2
Department of Finance and Audit, Army Logistics University, Chongqing 401311, China
3
Department of Automation, Tsinghua University, Beijing 100084, China
4
Department of Basic Science, Army Logistics University, Chongqing 401311, China
*
Author to whom correspondence should be addressed.
Academic Editor: Dominik Zimon
Sustainability 2021, 13(8), 4364; https://0-doi-org.brum.beds.ac.uk/10.3390/su13084364
Received: 11 March 2021 / Revised: 12 April 2021 / Accepted: 12 April 2021 / Published: 14 April 2021
(This article belongs to the Special Issue Supply Chain Management for Sustainable Development)
In this paper, we apply a combined revenue sharing and buyback contract to investigate the channel coordination of a two-echelon supply chain with a loss-averse retailer. Since loss-averse decision makers usually take on more risks, the Conditional Value-at-Risk (CVaR) measure is introduced to hedge against it and the retailer’s objective is to maximize the CVaR of utility. We obtain the retailer’s optimal order quantity under the combined contract. It is shown that there is a unique wholesale price coordinating the supply chain if the retailer’s confidence level is less than a threshold that is independent of contract parameters. Moreover, a complete sensitivity analysis of parameters is carried out. In particular, the retailer’s optimal order quantity and coordinating wholesale price decreases as the loss aversion or confidence level increases, while it increase as the buyback price or sharing coefficient increases. Furthermore, there exists the situation where the combined contract can coordinate the chain even though neither the revenue sharing nor buyback contract can when the contract parameters are constrained. View Full-Text
Keywords: conditional value-at-risk; supply chain coordination; optimal policy; loss aversion; risk management conditional value-at-risk; supply chain coordination; optimal policy; loss aversion; risk management
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MDPI and ACS Style

Liu, W.; Zhao, H.; Song, S.; He, W.; Li, X. Coping with Loss Aversion and Risk Management in the Supply Chain Coordination. Sustainability 2021, 13, 4364. https://0-doi-org.brum.beds.ac.uk/10.3390/su13084364

AMA Style

Liu W, Zhao H, Song S, He W, Li X. Coping with Loss Aversion and Risk Management in the Supply Chain Coordination. Sustainability. 2021; 13(8):4364. https://0-doi-org.brum.beds.ac.uk/10.3390/su13084364

Chicago/Turabian Style

Liu, Wei, Han Zhao, Shiji Song, Wenxuan He, and Xiaochen Li. 2021. "Coping with Loss Aversion and Risk Management in the Supply Chain Coordination" Sustainability 13, no. 8: 4364. https://0-doi-org.brum.beds.ac.uk/10.3390/su13084364

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