Study On Supply Chain Operations Under Robust Behavior

In modern market, with product life cycle’s increasing reduction, the rapid development of dual-channel and the demanddiversification, supply chain operations have been influenced by bothmuch uncertainty and behavior preferences, which result indiscrepancies betweenthe practical results and the conclusions obtained fromthe traditional supply chain management theory under the hypothesis of complete information and no preference. In this paper, we study the decisions onsupply chain operation involving the retailer’s robust behavior and consumers’ preferencesin the information loss case. The aim is to reveal more about information lossand behavioral preference effect onsupply chain operation and to provide theoretical basis and practical guidance for decision makers. The main contents are as follows:1) When the market demand information is lost, we analyze the retailer’s robust order decision under wholesale price contract and the effect of retailer’s robust behavior on the efficiency of the decentralized supply chain. Compared with the price in the case of full information case, we find that the wholesale price offered by supplier is lower whenthere exists the retailer’s robust behavior and retailer’s order quantity and expected profithave beendriven up, which prompts the increaseofthe whole supply chain’s expected profit and efficiency. From the supply chain operation perspective, we obtain that robust decision not only improves its own conservative property, but also raises the efficiency of supply chain under wholesale price contract. This means that robust decision has a good systemic effect which establishes the foundation for the application of robust decision under different conditions and provides a prelude for other chapters in this paper.2) When the demand in the offline market exhibits anuniform distribution, and only upper and lower bounds of the demand in the online market are known, we consider the retailer’s robust order problem under maximin regret criterion. In this chapter, we further explore the impact of the retailer’s robust behavior under double random variables on his order quantity and expected profit. We refer to the retailer’s robust behavior when one distribution function is known and the other is unknown as the “mixed robust behavior”. We find that whether offline market exists or not does make a difference in the conservatism of the retailer’s robust decision. When the retailer has an offline market, that is, the demand of offline market isn’t equal to 0, the retailer’s order quantity under robust decisionis different from the one in the full information case, but he can get almost the same expected profit under the two cases. This result not only means that the strategy under robust decision is very effective, but also meansthe conservative property of robust decision is improved. But when the retailer’s offline demand is 0, the retailer’s robust decision degenerates into the robust newsboy problem which is very conservative.3) When consumer has price fairness concern, and the distribution function of the justice reference price is difficult to obtain, we consider the retailer’s pricing problem under robust decision. Based on the above two chapters where only the retailer’ robust behavior is considered, we take a further step to take into account both the consumers’ price fairness concern and the retailer’s robust behavior.We refer to the retailer’s robust behaviorinfluenced bythe consumers’ price fairness concern as “interlaced robust behavior”. Wefind that with such a behavior the retailer’s profit is almost equal to the profit under the maximum entropy distribution and complete distribution. This means that the retailer’s robust decision is very effective. It also implies that the retailer does not need to get the distribution function of consumers’ fairness reference price because he can get nearly the same optimal profit under the robust decision only with the mean and variance of demand. This is a meaningful result.4) For the consumers’ evaluation of the new product’ value, thereexists two extreme cases: overvaluation or undervaluation.We consider the firm’s new product pricing strategy based on robust decision under these two extreme cases. In this part, we further consider the impact of interlaced robust behavior on firm’s new product pricingin the background of new product. We first propose two robust selection mechanisms to describe consumers’ behavior under the two extreme cases.Then, we obtain two robust demand functionsof the new products under the two robust selection mechanisms, andaccordingly, get the firm’s robust optimal prices respectively. Wefind that the two robust demand functions are the two nonlinear curves which are first concave and then convex. Finally, we obtain the upper and lower bounds for the new product’s demand and the corresponding expected profit under any realdistribution of consumers’ WTP in the case of interlaced robust behavior. These bounds provide references for the firm’s new product pricing.