Environmentally Friendly Supplier Selection Using Prospect Theory

Wei Song, Zhiya Chen, Xuping Wang, Qian Wang, Chenghua Shi and Wei Zhao
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Wei Song: School of Economics and Management, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China
Zhiya Chen: School of Economics and Management, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China
Xuping Wang: Faculty of Management and Economics, Dalian University of Technology, Dalian 116024, China
Qian Wang: School of Economics and Management, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China
Chenghua Shi: School of Economics and Management, Hebei University of Engineering, No. 199, Guangming South Street, Handan 056038, China
Wei Zhao: School of Computer, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China

Sustainability, 2017, vol. 9, issue 3, 1-17

Abstract: This paper proposes an optimal selection method to address the real-world problem of environmentally friendly supplier selection, based on prospect theory. This study adopted the manufacturer’s point of view, and considered the manufacturer’s psychological and behavioral factors in the process of choosing suppliers. The first step was to build supplier-selection indexes for manufacturers. Then, the study assessed the attribute of manufacturer expectations as a reference point. Next, index gains and losses were evaluated against the expectation reference point, yielding a payoff matrix and loss matrix. Finally, the study used prospect theory to calculate the comprehensive prospect value of each supplier; comprehensive prospect values were sorted in descending order to help manufacturers make the best choice.

Keywords: prospect theory; aspiration; gain matrix; loss matrix; comprehensive prospect value (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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