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An equilibrium model of the supply chain network under multi-attribute behaviors analysis

Chi Kin Chan, Yan Zhou and Kar Hung Wong

European Journal of Operational Research, 2019, vol. 275, issue 2, 514-535

Abstract: This paper studies a supply chain network (SCN) equilibrium model considering decision makers’ multi-attribute behaviors from the perspective of behavioral finance. In this paper, an equilibrium model of an uncertain SNC is constructed, in which retailers choose their decisions according to their risk-averse behavior, loss-averse behavior, and regret-averse behavior. By using different weights to represent retailers’ attitudes to these three behaviors, the retailers’ multi-attribute utility functions are developed. The equilibrium conditions of the manufacturers, the retailers, together with the network are established by the finite-dimensional variational inequality formulation. Three numerical examples are solved. In the first numerical example, we illustrate the effect of each of these three behaviors on the equilibrium decisions, the profits, and the utilities of the decision makers. In the other two numerical examples, we explore the effects of changes in attitudes to these three behaviors on the equilibrium decisions, profits, and utilities of the decision makers. The numerical results show that the equilibrium decisions are affected by each of these three behaviors very much. Moreover, they are sensitive to the changes in attitudes to these behaviors.

Keywords: Supply chain management; Risk-averse; Loss-averse; Regret-averse (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:ejores:v:275:y:2019:i:2:p:514-535