Pricing strategy and coordination in a dual channel supply chain with a risk-averse retailer

Bo Li, Peng-Wen Hou, Ping Chen and Qing-Hua Li

International Journal of Production Economics, 2016, vol. 178, issue C, 154-168

Abstract: This paper considers a dual channel supply chain consisting of a risk-neutral supplier and a risk-averse retailer, in which the market demand is uncertain and the supplier opens an e-channel, thus directly participating in the market. At the beginning of the sales season, the supplier and the retailer construct their initial stocks, and they follow a consistent pricing strategy. Under the Value-at-Risk (VaR) criterion and the Conditional Value-at-Risk (CVaR) criterion, we formulate the problem as a Stackelberg game model and obtain the equilibrium solutions in the decentralized and centralized situations. Based on the advantage of the CVaR measure, we further explore the effects of the retailer's risk indicator on the retail price, the ordering quantities of the two channels and the profits of the two members, and the total profits of the supply chain. Further, an improved risk-sharing contract is presented to coordinate the dual-channel supply chain and ensures that both supply chain members achieve a win–win outcome. In addition, we make an extension to the case of the inconsistent prices in the two channels, and we also verify that the dual-channel supply chain can be coordinated by the similar improved risk-sharing contract.

Keywords: Dual-channel supply chain; Coordination; Stackelberg game; Risk-averse; CVaR (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527316300809
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:178:y:2016:i:c:p:154-168

DOI: 10.1016/j.ijpe.2016.05.010

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
Bibliographic data for series maintained by Catherine Liu ().