Optimal Pricing and Ordering Strategies with a Flexible Return Strategy under Uncertainty

Pan Guo, Yanlin Jia, Junwei Gan and Xiaofeng Li
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Pan Guo: Business School, Sichuan University, Chengdu 610064, China
Yanlin Jia: School of Sciences, Southwest Petroleum University, Chengdu 610500, China
Junwei Gan: School of Economics and Management, Sichuan Tourism University, Chengdu 610100, China
Xiaofeng Li: Business School, Sichuan University, Chengdu 610064, China

Mathematics, 2021, vol. 9, issue 17, 1-12

Abstract: To coordinate the supply chain risk caused by demand uncertainty, this paper proposed a flexible return strategy under demand uncertainty, in which the retailer can choose return quantity independently by put option after the selling season, while the return quantity is usually determined by the supplier in the classical return strategy. In our novel return strategy, the exercise price is not fixed, and we developed the base model of this strategy, named the selective buyback contracts model. We have solved the optimal pricing and ordering strategies of supply chain members. Numerical studies demonstrated that the contracts can coordinate a supply chain with one retailer and one supplier, and the supplier can adjust the profit distribution of the supply chain by adjusting the option exercise price. Compared with other return strategies, the selective buyback contracts give the retailer more power of choice, and the supplier receives risk compensation from the put options.

Keywords: supply chain; demand uncertainty; flexible return strategy; put option; buyback contracts (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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