Supply Chain Contracts Based on Demand Risk Sharing and Decision Makers' Preference

With the intensification of competition and globalization of market, the reasonable sharing of Demand Risk (DR) is particularly important. Supply Chain (SC) contracts are the effective way to distribute the risk sharing among the participants of SC. This paper proposes SC contractual coordination approach based on demand risk sharing and decision makers' preference. Firstly, study defined a SC structure with the DR characterizations. Then, the SC conditions with Demand Risk Sharing (DRS) under revenue sharing contract and buyback contract analyzed. The equivalent conditions of the revenue sharing contract and the buyback contract based on DRS are obtained. Secondly, considering the impact of DRS on decision preferences this study taking the retailer's loss aversion preference into the both contracts. The revenue sharing and buyback contract models with the loss aversion retailer were constructed respectively. The coordination conditions of the two contracts are obtained. Parameters and the influence of loss aversion coefficient on DRS were analyzed. Finally, the buyback contract and the revenue sharing contract under DRS with retailer's loss aversion preference was simulated and compared by the numerical example.

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