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Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength

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  • Wang, Di
  • Liu, Weihua
  • Shen, Xinran
  • Wei, Wanying

Abstract

This paper discusses the order allocation in service supply chains under uncertain demand, and builds a Stackelberg game model composed of a service integrator (SI), a key service supplier (SP), and an ordinary SP. The individual impacts of risk aversion, peer competition, and relationship strength, and their interaction impacts are studied. There is an offset effect between risk aversion and relationship strength and an amplification effect between peer competition and relationship strength. Only if three factors meet the equilibrium effect, can SI achieve higher expected utility. The “incentive upgrade and cost sharing” contract is proposed to improve SI’s optimal expected utility.

Suggested Citation

  • Wang, Di & Liu, Weihua & Shen, Xinran & Wei, Wanying, 2019. "Service order allocation under uncertain demand: Risk aversion, peer competition, and relationship strength," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 293-311.
    • Handle: RePEc:eee:transe:v:130:y:2019:i:c:p:293-311
    DOI: 10.1016/j.tre.2019.09.005
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