Supply Contracting with Risk‐Sensitive Retailers under Information Asymmetry: An Exploratory Behavioral Study

Chow, Pui-Sze; Choi, Tsan‐Ming; Shen, Bin; Zheng, Jun

doi:10.1002/sres.2298

Cited by 10 publications

(3 citation statements)

References 27 publications

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“…First, we assume that supply chains are under symmetric information about risk‐averse level. Future work on this topic could include an investigation on the effect of asymmetric information and information sharing with risk aversion (Chow et al., ; Li et al., ; Zhang et al., ; Li and Zhou, ; Shen et al., ). Second, we use a wholesale price contract in this paper.…”

Section: Resultsmentioning

confidence: 99%

Financing decisions in supply chains with a capital‐constrained manufacturer: competition and risk

Shen

Wang

Cao

et al. 2019

Int Trans Operational Res

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Supply chain finance is a crucial topic. In this paper, we consider that a capital-constrained manufacturer can borrow money from either a bank (bank credit financing) or a retailer (trade credit financing). Our analysis compares supply chain performance under these two financing schemes. Furthermore, we extend our model to evaluate the impacts of retail competition and supply chain member's risk aversion on supply chains, which consist of one capital-constrained manufacturer and two competing retailers. We consider three financing schemes: only bank credit financing, dual trade credit financing, and bank and trade credit mix financing. We find that without retail competition, the retailer is always willing to use the trade credit financing; whereas with retail competition, if one retailer provides the trade credit but the other does not, the credit provider could receive the superior profit. Thus, providing an appropriate trade credit financing scheme is critically important for retailers. Moreover, we find that without retail competition, when a trade interest rate is relatively low, both the retailer and manufacturer could reach a win-win situation in the trade credit financing. However, with retail competition, supply chain members (i.e., two retailers and one manufacturer) will not have an all-win situation no matter which specific financing scheme is adopted and only a win-win-lose situation exists when using the credit mix financing scheme or the dual trade credit financing in supply chains. Last but not least, regardless of risk neutrality or aversion of supply chain members, their pricing decisions among three financing schemes are similar. This implies that the impacts of supply chain members' risk aversion are limited in supply chain financing scheme selection. More managerial insights are discussed. Fig. 1. The manufacturer's optimal decisions among three financing schemes in terms of various retailers' interest rates (we set α 0 = 10, δ = 0.5, c = 0.1, σ = 5, r f = 0.01, r b = 0.05, F 1 = 5, F 2 = 5, and C = 8). Proposition 5.(then π BC * M > π TC * M > π BT * M ; (ii) Q 1 > r b > N 1 , then π BC * M > π BT * M > π TC * M ; (iii) min{Q 1 , L 1 } > r b , then π TC * M > π BC * M > π BT * M ; (iv) N 1 > r b > Q 1 , then π TC * M > π BT * M > π BC * M ; (v) r b > max{Q 1 , L 1 }, then π BT * M > π BC * M > π TC * M ; (vi) L 1 > r b > N 1 , then π BT * M > π TC * M > π BC * M .

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Section: Resultsmentioning

confidence: 99%

Financing decisions in supply chains with a capital‐constrained manufacturer: competition and risk

Shen

Wang

Cao

et al. 2019

Int Trans Operational Res

Self Cite

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“…The literature demonstrates that an amalgamation of SC members’ risk-aversion with non-contractual conditions (e.g. cost uncertainty and product margin) may influence channel efficiency (Chow et al , 2014; Zhao et al , 2017; Wuttke et al , 2018).…”

Section: Data Statisticsmentioning

confidence: 99%

Behavioral operations management and supply chain coordination mechanisms: a systematic review and classification of the literature

Goudarzi

Bergey

Olaru

2021

SCM

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Purpose The recent surge in behavioral studies on the coordination mechanisms in supply chains (SCs) and advanced methods highlights the role of SC coordination (SCC) and behavioral issues associated with improving the performance of the operations. This study aims to critically review the behavioral aspect of channel coordination mechanisms. Design/methodology/approach Following a systematic literature review methodology, the authors adopt a combination of bibliometric (to reflect the current state of the field), content (using Leximancer data mining software to develop thematic maps) and theory-oriented qualitative analyzes that provide a holistic conceptual framework to unify the literature’s critical concepts. Findings The analysis confirms the plethora of risk-oriented publications, demonstrating that the second largest category of studies is concerned with social preferences theory. Most studies were based on experiments, followed by analytical modeling, revealing the impact of heuristics and individual preferences in SC decisions and suggesting promising managerial and theoretical avenues for future research. Originality/value The study sheds light on behavioral decision theories applied to SC coordination by categorizing the literature based on the adopted theories. The methodological contributions include using automated content analysis and validating the outcome by interviewing leading scholars conducting active research on “behavioral operations management and SC contracts.” The authors also propose several directions for future research based on the research gaps.

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“…For example, Wu and Chen (2014) examine the impacts brought by bounded rationality on the supply chain contract design. Chow et al (2014) study buyback supply contracting with risk-sensitive retailers under information asymmetry. Similar to the above related works, this paper also considers the boundedly rational decision making in the supply chain.…”

Section: Introductionmentioning

confidence: 99%

Quick response in fashion supply chains with retailers having boundedly rational managers

Choi

2016

Int Trans Operational Res

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In fashion retailing, inventory decisions are usually made by a human manager who is not necessarily perfectly rational. In this situation, the inventory decisions made may not always be optimal. At the same time, with advances in technology, fashion retailers have access to the latest market information and can implement the quick response (QR) system that is very helpful to systematically deal with market disruptions. In this paper, we explore the value of QR with the consideration of a boundedly rational human manager in the fashion retailing company. We show that for both cases, with and without QR, the human retail manager's level of bounded rationality significantly hurts the expected profits of the retailer and supply chain, but it does not hurt the manufacturer's expected profit. In addition, for both cases, with and without QR, we indicate how a minimum ordering quantity (MOQ) measure can be imposed by the manufacturer on the retailer, so that the manufacturer can benefit (in terms of expected profit) from the retailer's bounded rationality behavior. We further prove that if the manufacturer sets the MOQ to be the same as the retailer's theoretical optimal ordering quantity, the manufacturer will enjoy a higher profit with 50% chance, if the retailer is boundedly rational.

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Supply Contracting with Risk‐Sensitive Retailers under Information Asymmetry: An Exploratory Behavioral Study

Cited by 10 publications

References 27 publications

Financing decisions in supply chains with a capital‐constrained manufacturer: competition and risk

Financing decisions in supply chains with a capital‐constrained manufacturer: competition and risk

Behavioral operations management and supply chain coordination mechanisms: a systematic review and classification of the literature

Quick response in fashion supply chains with retailers having boundedly rational managers

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