How increasing relative risk aversion affects retailer orders under coordinating contracts

Bonzelet, Sabrina

doi:10.1016/j.ijpe.2022.108500

Cited by 8 publications

(3 citation statements)

References 25 publications

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“…To investigate the abovementioned predictions, we use the constant absolute risk aversion function (CARA), u false( π false) = − e − α π (Davis, 2015; Eeckhoudt et al., 1995), where α represents the level of risk aversion, to analyze the subject's utility function and run numerical analyses (see Section H of the Supplemental Material for details). The CARA measure for risk has been well accepted in various studies in supply chain management (Bonzelet, 2022; Kremer and Van Wassenhove, 2014). According to our analysis, this model predicts control-effort bias under both profit conditions, under our experiment parameters.…”

Section: Discussionmentioning

confidence: 99%

Characterizing the Retailer's Preference for Demand–Control and Demand–Promotion Efforts

Duhaylongsod,

Zhao

2024

Production and Operations Management

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This paper investigates a setting where the retailer invests costly effort to shape demand, such as reducing demand fluctuation through demand-control effort or increasing demand levels with demand-promotion effort. We explore the preference bias between these two effort types and examine the impact of such a bias on profit performance. The experimental findings reveal that actual effort investments exhibit a significant preference bias for promotion effort in the low-profit condition, while no significant preference bias is observed in the high-profit condition. This behavioral pattern can be captured by a reference-dependent behavioral model incorporating the retailer’s optimism level in the reference point. Additional analyses, such as robustness experiments and model extensions, provide further support for the promotion-effort bias in the low-profit condition. Our analysis presents a comprehensive understanding of demand-shaping effort preferences and extends the application of the reference-dependence framework. It provides insights for managers in identifying potential biases and mitigating profit loss in demand-shaping activities.

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Section: Discussionmentioning

confidence: 99%

Characterizing the Retailer's Preference for Demand–Control and Demand–Promotion Efforts

Duhaylongsod,

Zhao

2024

Production and Operations Management

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“…The following is a brief review of the literature on dualchannel supply chain contract coordination. Bonzelet [27] compared the impact of retailer's risk-averse on order quantity under the coordination of buyback contract and real options contract. Sun et al [28] explored the impact of digital showroom strategies on channel profits in the context of a dual-channel supply chain, and verified that the use of quantity discount and anti-showroom revenuesharing joint contract can achieve supply chain channel coordination.…”

Section: Literature Reviewmentioning

confidence: 99%

Channel Contract Coordination for Supply Chain With Behavior Preferences Under Uncertainties

Zhu,

Zhang,

et al. 2023

IEEE Access

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This paper studies the coordination of a dual-channel supply chain with behavior preferences under uncertainties of yield and demand. According to an improved FS model and mean-CVaR criterion, we construct optimal decision models in the centralized and decentralized situations, and propose the joint contract of revenue-sharing and risk-sharing to coordinate the dual-channel supply chain. Furthermore, this paper investigates the effects of fairness concerns and risk-averse preferences on supply chain members' profits and decisions, and studies the feasible region for joint contracts to achieve Pareto improvement. This paper finds that: 1 fairness concerns and risk aversion preferences exacerbate the double marginalization effect, 2 fairness concerns and risk aversion have a negative impact on manufacturer's decision in a manufacturer-led dual-channel supply chain, 3 the possibility of joint contract to achieve coordination increases with the increases of degree of fairness concerns and risk aversion.

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“…Some literature extends risk aversion to other issues beyond the newsvendor problem [25,45]. Bonzelet [46] analyzed how increasing relative risk aversion impacts order decisions of retailer under two coordinating contracts. Tey found that under real option contracts, riskaverse retailers order more than under buyback contracts.…”

Section: Te Newsvendor Problem Of Risk Aversionmentioning

confidence: 99%

Effects of Supply Reliability, Risk Aversion, and Wealth on Retailer’s Optimal Order Strategy

Peng

Ya-wei

Zou

et al. 2022

Mathematical Problems in Engineering

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This study examines the effects of supply reliability, risk aversion, and wealth on the optimal order strategy of retailers in the case of uncertain demand by measuring the degree of risk aversion. A more practical model of optimal ordering strategy is proposed, considering supply reliability, demand uncertainty, risk aversion, and retailer wealth, in which two random variables, supply reliability factors and demand, are introduced into the retailer’s function of expected utility. To avoid nonconvergence at both ends, the demand follows a triangular rather than a normal distribution. It is found that the optimal order quantity will increase with the improvement of supply reliability when the risk-averse degree is fixed. The results also show that the optimal order quantity of risk-averse retailers is smaller than that of risk-neutral retailers. Additionally, the optimal order quantity for the risk-averse retailer decreases as the degree of risk aversion increases, when supply reliability is fixed. Further research shows that the retailer is a constant absolute risk aversion (CARA). That means retailer’s wealth has nothing to do with the risk aversion and changes in the retailer’s wealth will not affect the retailer’s optimal order quantity. This study provides valuable insights for sustainable supply chain management and marketing.

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How increasing relative risk aversion affects retailer orders under coordinating contracts

Cited by 8 publications

References 25 publications

Characterizing the Retailer's Preference for Demand–Control and Demand–Promotion Efforts

Characterizing the Retailer's Preference for Demand–Control and Demand–Promotion Efforts

Channel Contract Coordination for Supply Chain With Behavior Preferences Under Uncertainties

Effects of Supply Reliability, Risk Aversion, and Wealth on Retailer’s Optimal Order Strategy

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