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Supply chain coordination with a wholesale price contract for behavioral decision-makers

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  • Jammernegg, Werner
  • Kischka, Peter
  • Silbermayr, Lena

Abstract

Traditionally supply chain coordination is defined for expected profit maximizing decision-makers, including the coordinator. In this setting, a wholesale price contract cannot coordinate a supplier–buyer relationship because of double marginalization. Nevertheless, the wholesale price contract is frequently applied in practice because it is simple and easy to implement. A possible explanation could be that the decision-makers are influenced by behavioral factors, such as individual biases and social preferences. We propose the supply chain’s objective maximization (SCOM) approach to coordinate a supplier–buyer relationship, where not only the buyer (newsvendor) but also the coordinator, typically the supplier, may be behavioral decision-makers. Applying the SCOM criterion, we present a general condition for the existence of a coordinating wholesale price based on a monotonicity assumption that holds for many behavioral factors.

Suggested Citation

  • Jammernegg, Werner & Kischka, Peter & Silbermayr, Lena, 2026. "Supply chain coordination with a wholesale price contract for behavioral decision-makers," European Journal of Operational Research, Elsevier, vol. 329(1), pages 112-123.
    • Handle: RePEc:eee:ejores:v:329:y:2026:i:1:p:112-123
    DOI: 10.1016/j.ejor.2025.06.029
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    References listed on IDEAS

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