Supply Chain Contracting with Linear Utility Function

Ningning Wang, Jibao Gu, Qinglong Gou and Jinfeng Yue
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Ningning Wang: University of Science and Technology of China, Hefei, China
Jibao Gu: University of Science and Technology of China, Hefei, China
Qinglong Gou: University of Science and Technology of China, Hefei, China
Jinfeng Yue: Middle Tennessee State University, Murfreesboro, TN, USA

International Journal of Information Systems and Supply Chain Management (IJISSCM), 2017, vol. 10, issue 2, 1-20

Abstract: The supply chain contracting has traditionally been based on the profit maximization assumption. Recent research has shown that some behavior factors may influence the decision making of supply chain members. The authors utilize a linear utility function to depict such behavior factors and incorporate these into the newsvendor model. The linear utility function provides sufficient flexibility to better capture people's various behavior factors. By supposing the agents are concerned with behavior factors, the authors first investigate how the factors affect the supply chain under wholesale price contract, and find that they do not influence coordination condition, but can adjust the distribution of profits. Then they extend their study to other four common contracts with a similar method and systematically demonstrate that the behavior of agents in such a linear setting has no effect on the conditions of coordinating supply chain.

Date: 2017
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