SUNConferences, Computers and Industrial Engineering 42

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Using Revenue Sharing Contract To Coordinate Supply Chain With A Risk-Averse Retailer
Zhong Yao, Linlin Zhang, Yalan Cao

Last modified: 2012-06-20


Revenue sharing contract is an effective mechanism in supply chain coordination. However, whether or not it works when participants of the supply chain members have their own preferences on the risk attitude is an important research issue. This paper investigates this kind of issues. The retailer faces a risk preference measured by the exponential utility function and the supplier as a Stackelberg leader provides a revenue sharing contract for that retailer. The retailer then decides to place an order from the supplier according to his risk preference and random demand. We assume that the supplier known the retailer’s market information and its risk preference. Under this business situation, we find that the revenue sharing contract still can coordinate the supply chain in different contract parameters. However, the contract parameters can affect the supply chain total profit and the splitting of profit between the supplier and the retailer. The result of this paper can supplement the supply chain coordination research literature considering decision-maker’s risk attitude, and also be effective to support decision-maker to set incentive mechanisms or respond to the incentives.

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