 Channel coordination with a loss-averse retailer and option contractsXu Chen, Gang Hao and Ling Li International Journal of Production Economics, 2014, vol. 150, issue C, 52-57 Abstract: We investigate a one-period two-echelon supply chain composed of a risk-neutral supplier that produces short life-cycle products and a loss-averse retailer that orders from the supplier via option contracts and sells to end-users with stochastic demand in the selling season. When a single retail season begins, the retailer can obtain goods by purchasing and exercising call options. We derive the loss-averse retailer's optimal ordering policy and the risk-neutral supplier's optimal production policy under these conditions. In addition, we find that the loss-averse retailer may order less than, equal to, or more than the risk-neutral retailer. Further, we show that the loss-averse retailer's optimal order quantity may increase in retail price and decrease in option price and exercise price, which is different from the case of a risk-neutral retailer. Finally, we study coordination of the supply chain and show that there always exists a Pareto contract as compared to the non-coordinating contracts. Keywords: Supply chain management; Loss aversion; Finance–operations-interface; Option contracts; Supply chain coordination (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:150:y:2014:i:c:p:52-57 DOI: 10.1016/j.ijpe.2013.12.004 Access Statistics for this article International Journal of Production Economics is currently edited by Stefan Minner More articles in International Journal of Production Economics from Elsevier |
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