Inventory and Pricing Decisions Under Wholesale Price Contract with Social Preferences

Liu Shuren (), Chen Huina () and Chen Lili ()
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Liu Shuren: School of Mathematics and Computational Science, Xiangtan University, Xiangtan411105, China
Chen Huina: School of Mathematics and Computational Science, Xiangtan University, Xiangtan411105, China
Chen Lili: School of Mathematics and Computational Science, Xiangtan University, Xiangtan411105, China

Journal of Systems Science and Information, 2016, vol. 4, issue 1, 68-86

Abstract: This paper introduces the other-regarding preferences coefficients and studies the impact of social preferences on supply chain performance in the price-setting newsvendor setting. It is assumed that the stochastic demand is multiplicative. The manufacturer and retailer play a Stackelberg game. We analyze the impact of the decision-maker’s social preferences on the manufacturer’s optimal wholesale price, the retailer’s optimal retail price and order quantity, the supply chain member’s profits and utilities, and the supply chain system’s profits and utilities under three different cases that only the retailer, only the manufacturer and both are with social preferences. We show that a manufacturer, as a leader, should find a spiteful retailer, while a retailer, as a follower, should find a manufacturer with generous liability, to improve the entire supply chain. Finally, numerical examples are given to illustrate these results.

Keywords: social preference; supply chain management; wholesale price contract; price-setting newsvendor (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:4:y:2016:i:1:p:68-86:n:5

DOI: 10.1515/JSSI-2016-0068

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