Dual‐channel supply chain coordination under risk aversion and fairness concerns

• Published in: Managerial and decision economics Vol. 44; no. 6; pp. 3289 - 3307
• Main Authors: Xue, Lin, Wang, Kangzhou
• Format: Journal Article
• Language: English
• Published: Chichester Wiley Periodicals Inc 01.09.2023
• Subjects: Centralization; Contracts; Coordination; Decentralization; Fairness; Risk; Supply; Uncertainty; Utility functions
• ISSN: 0143-6570; 1099-1468
• DOI: 10.1002/mde.3878

This paper studies coordination in a dual‐channel supply chain consisting of a risk‐averse retailer with fairness concerns and a risk‐neutral and fairness‐neutral manufacturer where the market demand and manufacturer yield are both uncertain. Based on CVaR criterion and fairness concern theory, a dual‐channel supply chain decision‐making model for the risk‐averse retailer with fairness concerns is constructed, and the optimal decision under centralized and decentralized dual‐channel supply chains is discussed. A new joint contract formed from revenue‐sharing and buyback contracts is presented to coordinate the dual‐channel supply chain under yield and demand uncertainty conditions that realizes Pareto improvement. The influences of yield and demand uncertainties, the risk aversion coefficient, and the fairness concern coefficient on retailer‘s order quantity, retailer's expected utility function value, manufacturer's planned yield, and manufacturer's expected utility function value are analyzed through numerical examples. The feasible range of Pareto improvement under the joint contract is also discussed.