Decentralized Supply Chain Decisions on Lead Time Quote and Pricing with a Risk‐averse Supplier |
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Authors: | Weichun Chen Bo Li Dongping Song Qinghua Li |
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Institution: | 1. College of Management and Economics, Tianjin University, Tianjin, China;2. School of Management, Liverpool University, Liverpool, Merseyside, UK |
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Abstract: | We consider a decentralized supply chain containing a risk‐averse supplier and a risk‐neutral retailer with lead time‐sensitive and price‐sensitive demands. A Stackelberg game is employed to model the lead time quote and pricing decision process between the two members under the conditional value‐at‐risk criterion. A unique equilibrium is obtained. Using the corresponding centralized mode as a benchmark, we find that a less risk‐averse supplier is better to cooperate and share risk with the retailer to improve the entire supply chain's efficiency. With a uniformly distributed realized lead time, the impact of the supplier's risk aversion on the decisions can be characterized by a few threshold values of the late delivery penalty cost. In particular, when the unit delay penalty cost exceeds a certain level, a more risk‐averse supplier will counter‐intuitively quote a shorter lead time by risking a higher delay penalty cost. Copyright © 2016 John Wiley & Sons, Ltd. |
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