Supply Chain Coordination with a Risk-Averse Retailer and a Combined Buy-Back and Revenue Sharing Contract

Han Zhao, Shiji Song, Yuli Zhang (), Jatinder N. D. Gupta (), Anna G. Devlin () and Raymond Chiong ()
Additional contact information
Han Zhao: Department of Automation, Tsinghua University, Beijing 100084, P. R. China2Department of Basic Science, Army Logistics Academy, Chongqing 401311, P. R. China
Shiji Song: Department of Automation, Tsinghua University, Beijing 100084, P. R. China
Yuli Zhang: School of Management and Economics, Beijing Institute of Technology, Beijing 100081, P. R. China
Jatinder N. D. Gupta: College of Business, University of Alabama in Huntsville, Huntsville, AL 35899, USA
Anna G. Devlin: LeBow College of Business, Drexel University, Philadelphia, PA 19104, USA
Raymond Chiong: School of Electrical Engineering and Computing, The University of Newcastle, Callaghan, NSW 2308, Australia

Asia-Pacific Journal of Operational Research (APJOR), 2019, vol. 36, issue 05, 1-23

Abstract: This paper investigates the ability of a combined buy-back (BB) and revenue sharing (RS) contract to improve the efficiency of a supply chain involving a risk-neutral supplier and a risk-averse retailer facing stochastic demand. We show that the combined contract can coordinate the supply chain under mild conditions. Further, the effects of risk aversion and contract parameters on the agents’ decision-making are analyzed when the retailer’s risk aversion is modeled by the conditional value-at-risk (CVaR) criterion. In contrast to individual BB and RS contracts, the combined contract is able to mitigate the effect of risk-aversion and allow the supplier to obtain higher expected profit. Moreover, situations exist where the combined contract can coordinate the supply chain when neither the BB nor the RS contract can coordinate it. Numerical experiments conducted further confirm the analytical results derived.

Keywords: Supply chain coordination; combined contract; conditional value-at-risk (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217595919500283
Access to full text is restricted to subscribers

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:wsi:apjorx:v:36:y:2019:i:05:n:s0217595919500283

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217595919500283

Access Statistics for this article

Asia-Pacific Journal of Operational Research (APJOR) is currently edited by Gongyun Zhao

More articles in Asia-Pacific Journal of Operational Research (APJOR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().