Supply Chain Contracting with Linear Utility Function

2020 ◽  
pp. 750-769
Author(s):  
Ningning Wang ◽  
Jibao Gu ◽  
Qinglong Gou ◽  
Jinfeng Yue
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Utility Function ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Newsvendor Model ◽  
Supply Chain Contracting ◽  
Linear Utility ◽  
Linear Utility Function ◽  
Linear Setting

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.

Supply Chain Contracting with Linear Utility Function

2017 ◽  
Vol 10 (2) ◽  
pp. 1-20 ◽  
Author(s):  
Ningning Wang ◽  
Jibao Gu ◽  
Qinglong Gou ◽  
Jinfeng Yue
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Utility Function ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Newsvendor Model ◽  
Supply Chain Contracting ◽  
Linear Utility ◽  
Linear Utility Function ◽  
Linear Setting

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.

Revenue Sharing Contract of Green Supply Chain under Manufacturer Risk-Aversion

2014 ◽  
Vol 697 ◽  
pp. 482-487
Author(s):  
Shi Ying Jiang ◽  
Chun Yan Ma
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Risk Aversion ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Revenue Sharing ◽  
Green Supply Chain ◽  
Game Model ◽  
Product Price ◽  
Revenue Sharing Contract

Background on two stages green supply chain consisting of a manufacturer and a retailer, considering the degree of risk aversion and product greenness, consumer preferences and other factors, the centralized decision-making game model and manufacturer-leading Stackelberg game model are established.Then two game models are compared. The interaction of product greenness, wholesale price, product price,and risk aversion utility for manufacturers and retailers are also disscussed. Finally, the revenue sharing contract is applied to coordinate the green supply chain . The results show that:(1) In the centralized decision-making model, there is a critical value of the product green degree; (2)In manufacturer-leading Stackelberg game model, the higher the green degree of the product, the higher the manufacturer's wholesale price,and the wholesale price increases as risk aversion degree of manufacturers improves;(3)The revenue sharing contract can coordinate this type of green supply chain under manufacturers risk-averse.

scholarly journals The More Supply Chain Control Power, the Better? A Comparison among Four Kinds of Cooperation Models

2015 ◽  
Vol 2015 ◽  
pp. 1-19 ◽  
Author(s):  
Weihua Liu ◽  
Shuqing Wang ◽  
Donglei Zhu
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
The Other ◽  
Order Quantity ◽  
Control Power ◽  
Decentralized Decision Making ◽  
Optimal Value ◽  
Total Profit

This paper introduces the parameter of supply chain control power into existing supply chain coordination models and explores the impacts of control power on the profits of manufacturer, retailer, and the overall supply chain under four modes of decision-making, including the decentralized decision-making dominated by manufacturer, the decentralized decision-making dominated by retailer, centralized decision-making, and Nash negotiation decision-making. Some significant conclusions are obtained. Firstly, supply chain control power does have great impact on the supply chain profits. The profit of the whole supply chain with centralized decision-making is higher than those of the other three modes, while the overall profit of supply chain with decentralized decision-making is superior to the profit when retailer and manufacturer dominate the supply chain together. Secondly, with decentralized decision-making, for manufacturer and retailer, it is beneficial to gain the control powers of the supply chain; however, control power has an optimal value, not the bigger, the better. Thirdly, under certain circumstances, order quantity will increase and the wholesale price will decrease when control power is transferred from manufacturer to retailer. In this case, the total profit of supply chain dominated by retailer will be greater than that dominated by manufacturer.

Risk Behavior Under Linear Utility Function

1987 ◽  
Vol 1 (3) ◽  
pp. 49-56
Author(s):  
Young Chin Kim ◽  
Bong Joon Yoon
Keyword(s):  
Utility Function ◽  
Risk Behavior ◽  
Linear Utility ◽  
Linear Utility Function

scholarly journals Research on the supply chain model based on the differentiation of green agricultural products

2018 ◽  
Vol 232 ◽  
pp. 02012
Author(s):  
Hui Su ◽  
Yuquan Cui ◽  
Bingjie Liu
Keyword(s):  
Supply Chain ◽  
Utility Function ◽  
Stackelberg Game ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
Agricultural Products ◽  
Coordination Mechanism ◽  
Optimal Decision ◽  
Quality Level ◽  
Chain Model

This paper studies the supply chain of green agricultural products with "agricultural super docking" mode based on the different management. The "agricultural super docking" mode is a direct connection between supermarkets and farmers (or cooperatives), what the supermarket needs and what the farmers produce. The green degree is used to indicate the quality level of health, safety and nutrition of agricultural products. The greater the green degree is, the better the quality of agricultural products is. In order to meet the needs of all consumers, the supermarket decide to carry out different management. That is to say, supermarket sells ordinary agricultural products and green agricultural products at the same time. This paper gives the consumer utility function for ordinary agricultural products and green agricultural products separately. We analyze the consumers’ choice behaviors based on the consumer utility function .We discuss the optimal decision of supermarket choosing one farmer and supermarket choosing two farmers based on Stackelberg game. It can be seen from the comparison that supermarket can get more profits when it chooses two farmer to order separately. Finally, a "wholesale price + ordering subsidy" coordination mechanism is proposed to realize supply chain coordination. .

scholarly journals Emergency Strategies of Closed-Loop Supply Chain with Single Retailer Recycling under Demand Disruptions

2020 ◽  
Vol 2020 ◽  
pp. 1-19
Author(s):  
Jian Cao ◽  
Yuting Yan ◽  
Lingyuan Wang ◽  
Xihui Chen ◽  
Xuemei Zhang ◽  
...  
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Closed Loop ◽  
Wholesale Price ◽  
Normal Operation ◽  
Market Demand ◽  
Closed Loop Supply Chain ◽  
Decentralized Decision Making ◽  
Retail Prices ◽  
Emergency Decision

The uncertainty caused by emergencies will influence the normal operation of the supply chain. Considering demand disruptions, a closed-loop supply chain consisting of one manufacturer and two competing retailers based on decentralized decision-making is considered. In the supply chain, one retailer recovers end-of-life products while the other does not. Analytic results show that, when the disturbance of demand occurs, the manufacturer and retailers adjust the wholesale price and retail prices of products according to the direction of the market demand disruptions. Under demand disruptions, the retailer who participates in recovering can gain more profits, especially in the case of the positive disruption. Theoretic and pragmatic references for the emergency decision-making of closed-loop supply chain enterprises are provided.

Coordination of a Supply Chain with Satisficing Objectives Using Contracts

2007 ◽  
pp. 232-251 ◽  
Author(s):  
C. Shi ◽  
B. Chen
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Expected Profit ◽  
Business Success ◽  
Pareto Optimal ◽  
Performance Targets ◽  
Decentralized Supply Chain ◽  
Quantity Flexibility ◽  
Buy Back

Setting performance targets and managing to achieve them is fundamental to business success. As a result, it is common for managers to adopt a satisficing objective—that is, to maximize the probability of achieving some preset target profit level. This is especially true when companies are increasingly engaged in short-term relationships enabled by electronic commerce. In this chapter, our main focus is a decentralized supply chain consisting of a supplier and a retailer, both with the satisficing objective. The supply chain is examined under three types of commonly used contracts: wholesale price, buy back, and quantity flexibility contracts. Because a coordinating contract has to be Pareto optimal regardless of the bargaining powers among the agents, we first identify the Pareto-optimal contract(s) for each contractual form. Second, we identify the contractual forms that are capable of coordination of the supply chain with the satisficing objectives. In contrast to the well-known results for the supply chain with the objectives of expected profit maximization, we show that wholesale price contracts can coordinate the supply chain with the satisficing objectives, whereas buy back contracts cannot. Furthermore, quantity flexibility contracts have to degenerate into wholesale price contracts to coordinate the supply chain. This provides an important justification for the popularity of wholesale price contracts besides their simplicities and lower administration costs. Finally, we discuss possible extensions to the model by considering different types of objectives for different agents.

RISK BEHAVIOR UNDER LINEAR UTILITY FUNCTION

1987 ◽  
Vol 1 (3) ◽  
pp. 49-56
Author(s):  
YOUNG CHIN KIM ◽  
BONG JOON YOON
Keyword(s):  
Utility Function ◽  
Risk Behavior ◽  
Linear Utility ◽  
Linear Utility Function

The Effect of Risk Sensitivity on Collaborative New Product Development in a Supply Chain

2010 ◽  
Vol 450 ◽  
pp. 381-384
Author(s):  
Yu Zhou ◽  
Rong Yao He
Keyword(s):  
Supply Chain ◽  
Product Development ◽  
New Product Development ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Optimal Strategies ◽  
New Product ◽  
Product Management ◽  
Chain Model ◽  
Risk Sensitivity

The increasing risks and costs of new product development require firms to collaborate with their supply chain partners in product management. In this paper, a supply chain model is proposed with one risk-neutral supplier and one risk-averse manufacturer. The manufacturer has an opportunity to enhance demand by developing a new product, but both the actual demand for new product and the supplier’s wholesale price are uncertain. The supplier has an incentive to share risks of new product development via an advance commitment to wholesale price for its own profit maximization. The effects of the manufacturer’s risk sensitivity on the players’ optimal strategies are analyzed and the trade-off between innovation incentives and pricing flexibility is investigated from the perspective of the supplier. The results highlight the significant role of risk sensitivity in collaborative new product development, and it is found that the manufacturer’s innovation level and retail price are always decreasing in the risk sensitivity, and the supplier prefers commitment to wholesale price only when the risk sensitivity is below a certain threshold.

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