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Supply Chain Coordination Model with Retailer fs Risk Attitudes

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  • Huy CHHAING

    (Graduate School of Economics, Osaka University)

Abstract

One of the major concerns in supply chain management is the coordination among various members of a supply chain comprising suppliers, manufacturers, distributors, wholesalers and retailers. We consider a newsvendor model in a two level supply chain with one supplier and one retailer. In this model, the retailer must order the item from the supplier prior to the selling season. Due to the short selling season and long replenishment lead time, the retailer is unable to reorder the item by using actual sales data generated from the early part of the season. The purpose of this paper is to discuss the e ect of the attitudes toward risk of the members on the coordination in a supply chain. Using the risk averse utility functions, we show that, the risk averse retailer's optimal order quantity is less than or equal to that of a risk neutral one, when the goodwill penalty cost is ignored. We also explore the relationship between the retailer's order quantity and the risk aversion function in a special case.

Suggested Citation

  • Huy CHHAING, 2008. "Supply Chain Coordination Model with Retailer fs Risk Attitudes," Discussion Papers in Economics and Business 08-03, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0803
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    References listed on IDEAS

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    More about this item

    Keywords

    Supply chain management; Newsvendor model; Risk aversion.;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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