Coordination of a supply chain with loss-averse consumers in service quality

Danqin Yang and Tiaojun Xiao

International Journal of Production Research, 2017, vol. 55, issue 12, 3411-3430

Abstract: We develop a two-period game model to study the coordination mechanism for a supply chain with loss-averse consumers who are assumed to have dwindling sensitivity to service quality gain relative to loss. We find that all-unit quantity discount coupling with service subsidy rate can coordinate the retailer’s price and service quality decisions together in each period. When consumers become more loss-averse in service quality, the coordinated wholesale price in the first period might increase; whereas that in the second period decreases. With Pareto coordination mechanism, larger loss-aversion might weaken the supplier’s bargaining power. We provide managerial insights on how to adjust the coordinated contract when the consumers’ loss-aversion and reference value of service quality level change.

Date: 2017
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Citations: View citations in EconPapers (14)

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DOI: 10.1080/00207543.2016.1241444

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