A mixed wholesale-option-contract to fix the demand imbalance between substitutable air cargo routes: A cooperative game approach

Shaban, Ibrahim Abdelfadeel; Chan, Felix T.S.; Chung, Sai Ho; Qu, Ting

doi:10.1016/j.eswa.2021.115300

Cited by 9 publications

(2 citation statements)

References 74 publications

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“…The above studies all built game models and designed coordination mechanisms based on wholesale price contracts and obtaining optimal decisions about prices and order or production quantities. Compared to wholesale price contracts, option contracts have significant advantages in responding to demands and price fluctuations, and can provide buyers with opportunities for delayed selection and flexible ordering [11][12][13]. The main research on option contracts with uncertain demand or supply are as follows.…”

Section: Literature Reviewmentioning

confidence: 99%

Wholesale Price Contract or Mixed Wholesale-Option-Contract? Procurement Strategy for a Contract Farming Supply Chain under Flexible Supply

Hu,

Liu,

Liu

2024

Sustainability

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Due to the uncertainty of world economic development, market demands are stochastic and the supply quantities of suppliers in the supply chain are always flexible, so a mixed wholesale-option-contract (abbreviated as a mixed contract) is one of the good ways for commodity distributors to cope with flexible supply. For a contract farming supply chain composed of a distributor and two suppliers under random demand and yield, we propose the new mixed contracts with flexible supply for the players to make better procurement and inventory decisions. Therefore, with decentralized decision making with a wholesale price contract and centralized decision making as benchmarks for comparison, the advantages of mixed contracts were demonstrated in this paper. The expected profit function under each transaction mode was proved to be concave and the optimal orders or production quantities were obtained and compared. Theoretical derivation and numerical examples were carried out and the main conclusions are as follows. First, the distributor’s total order quantities are the largest under centralized decision making, then the second largest under mixed contracts, then the least under wholesale price contracts. Second, for the dealer under mixed contracts, within the feasible range, the smaller the option price (or option exercise price) is, the greater the dealer’s profit is. Third, with increasing initial order quantity, the gap between the dealer’s profits under different option prices (or option exercise prices) narrows, and eventually tends to the same point. For both the suppliers as a whole, a mixed contract is better than the wholesale price one. Fourth, when the prices of the option contract change within a reasonable range (they may not be too small or too large), the profits of both the dealer and suppliers under a mixed contract are not only higher than those under the wholesale price contract, but also higher than those under centralized decision making. Finally, policies and suggestions (such as full investigation, explicitly defining the process of contracts, establishing real-time supervision and information sharing mechanisms, and so on) were put forward to improve the accuracy of supply and demand forecasting, better implement mixed contracts under flexible supply, and strengthen reforms about agricultural supply side.

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Section: Literature Reviewmentioning

confidence: 99%

Wholesale Price Contract or Mixed Wholesale-Option-Contract? Procurement Strategy for a Contract Farming Supply Chain under Flexible Supply

Hu,

Liu,

Liu

2024

Sustainability

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“…For example, airlines offer cargo capacity for booking, and although this capacity is limited, they sell more than their actual capacity because they offer the capacity for a specific flight a year in advance. Again, because the market demand is dynamic and unpredictable, buyers such as logistics companies and freight forwarders cancel some of the order quantity a few days before the flight departure, and others do not show up at all (Shaban et al, 2021). These two reasons lead to an underutilised cargo flight.…”

Section: H-value Variants and The Overbooking Problemmentioning

confidence: 99%

Risk-averse pricing decisions based on prospect theory

Shaban

2023

Decis. Mak. Appl. Manag. Eng.

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This study examines the risk behaviour of a decision-maker regarding pricing decisions with the aid of the newsvendor model. In this regard, prospect theory and reference point concept are adopted to formulate the value function of the decision-maker. Unlike the traditional reference points (quantity-based), a reference point is deemed a function of the price. It is proved that a convex combination of the maximum-expected profits and expected losses represents the reference point. Closed-form solutions for the optimum price and quantity orders are obtained under uniformly and exponentially distributed demand. Moreover, the risk when the ordering quantity does not match the actual demand is discussed. The results-based numerical experiments reveal that the risk-averse decision-maker manages to increase the price to evade different expected costs, such as shortages and overstocking. Finally, for the same risk aversion level, the maximum reduction percentage of the optimal quantity concerning the price reaches approximately 8% in the exponential distribution, whereas it decreases by approximately 30% under the uniform distribution.

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Pricing strategy and order quantity allocation with price-sensitive demand in three-echelon supply chain

Hanh¹,

Chen²,

Hợp³

2022

Expert Systems with Applications

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A mixed wholesale-option-contract to fix the demand imbalance between substitutable air cargo routes: A cooperative game approach

Cited by 9 publications

References 74 publications

Wholesale Price Contract or Mixed Wholesale-Option-Contract? Procurement Strategy for a Contract Farming Supply Chain under Flexible Supply

Wholesale Price Contract or Mixed Wholesale-Option-Contract? Procurement Strategy for a Contract Farming Supply Chain under Flexible Supply

Risk-averse pricing decisions based on prospect theory

Pricing strategy and order quantity allocation with price-sensitive demand in three-echelon supply chain

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