Ordering And Pricing Decision And Stimulation Of Enterprise And Supply Chain Based On Loss Aversion

Traditional research on management of supply chain is mainly based on loss-neutral, that is, the decision-maker has not any preferences to loss. However, in reality, enterprise and customer may be have loss-averse attitude, moreover, the relationships of supply chain members and game behaviors are changed by loss-aversion, coordination and incentive strategies of supply chain are quite different. so, influence on decision-making of enterprise and contracts of supply chain by loss-aversion have been cared by academic field. in this paper, the loss-averse model is established to depict loss-averse characteristics of decision-maker based on prospect theory, using methods of quantitative and qualitative analysis, study ordering and pricing strategies of enterprise and incentive issue of supply chain, verified by the analysis of numerical example. The main research contents and results are as follows:1) Study ordering and pricing decisions of enterprise and incentive problem based on loss aversion. first of all, compare the order decisions of loss-averse retailer with loss-neutral retailer. find the common and difference between them, the difference is that loss-averse retailer’s order quantity increases or decreases with retail price, purchase price increasing; and loss-neutral retailer’s order quantity increases with retail price increasing, and decreases with purchase price increasing, which indicates that loss aversion has important effect on order decision-making. second, loss-averse customer is considered, study loss-neutral retailer’s ordering and pricing decisions and incentive problem, results show that customer’s loss aversion reduces order and price of retailer, detrimental to retailer’s performance; compensation contract can increase retailer’s performance, meanwhile, when the compensation amounts constrict to a certain range, compensation contract can increase customer’s utility, win-win between retailer with customer may be realized; customer’s loss aversion is greater, compensation contract has more obvious to weaken adverse impact on customer and retailer by loss aversion. finally, the situation of loss-averse retailer facing loss-averse customer is considered, results show that customer’s loss aversion brings adverse effect to customer’s performance with non-compensation contract, but bring beneficial effect to customer’s performance with compensation contract; win-win is also realized when compensation amount is in the smaller range.2) Study ordering, pricing decisions and incentive problem of supply chain based on loss aversion. first of all, ordering, pricing decisions and incentive problem between loss-averse retailer with loss-neutral manufacturer is considered, results show that retailer’s loss aversion makes manufacturer reduce price, retailer reduce order, and brings detrimental effect to performances of manufacturer and retailer; meanwhile, buyback contract makes manufacturer raise price, retailer increase order, when buyback price is less than certain range, performances of manufacturer and retailer are improved, buyback contract can play incentive effect; loss-averse degree is greater, buyback contract has more obvious to weaken adverse effect on retailer by loss aversion. then, ordering, pricing decisions and incentive problem between loss-averse retailer with loss-averse manufacturer is considered, results show that buyback contract can play incentive effect when buyback price is less than smaller range, retailer’s loss-averse degree is greater, buyback contract decreases to weaken adverse impact on retailer by loss aversion.3) Research ordering, pricing decisions of enterprise and incentive problem of supply chain under the background of asymmetric loss-averse information. first, asymmetric loss-averse information of customer is considered, study ordering, pricing decisions and incentive problem of loss-neutral retailer. results show that compared with the symmetric information, if retailer underestimates loss-averse degree of customer, which leads retailer to raise price and increase order, but decreases demand and customer’s utility, whether retailer underestimates or overestimates customer’s loss-averse degree, retailer’s profit would be reduced; when retailer underestimates loss-averse degree of customer, compensation contract can play incentive effect, but, when retailer overestimates customer’s loss aversion to the greater extent, compensation contract decreases customer’s utility, at this time, compensation contract cannot play incentive effect; and in compensation contract situation, compensation amount is the greater, loss-averse information has little influence on performances of retailer and customer. Then, asymmetric loss-averse information of retailer is considered, study ordering, pricing decisions and incentive problem between loss-averse retailer with loss-neutral manufacturer. results show that compared with symmetric information, manufacturer raises price, retailer reduces order, utilities of retailer and supply chain are decreased when manufacturer underestimates retailer’s loss-aversion, whether manufacturer underestimates or overestimates loss-averse degree of retailer, which leads manufacturer’s profit to decline; when buyback price is less than certain range, performances of manufacturer, retailer and supply chain are improved by buyback contract, therefore, buyback contract can play incentive effect; in the buyback contract situation, performances of retailer and manufacturer can be improved when manufacturer overestimates retailer’s loss-aversion, and buyback price is the greater, loss-averse information has more influence on retailer’s performance.4) Take comparative mentality into reference point of loss-aversion, study ordering, pricing decisions of enterprise and incentive problem of supply chain. first, take comparative mentality into loss-averse customer, research ordering, pricing decisions and incentive problem of loss-neutral retailer. results show that retailer decreases price, reduces order, performances of retailer and customer are decreased by comparative mentality; compensation contract can raise price and order; compensation contract can play incentive effect when compensation amount is in certain range, but customer’s utility is decreased when compensation amounts extend certain range, at this time, compensation contract cannot play incentive effect. then, comparative mentality is considered into loss-averse retailer, research ordering, pricing decisions and incentive problem between retailer with loss-neutral manufacturer. results show that manufacturer reduces price, retailer reduces order, performances of manufacturer, retailer and supply chain are decreased by comparative mentality; when buyback price is less than certain range, buyback contract can raise price, increase order, improve performances of manufacturer, retailer and supply chain, so, buyback contract can play incentive effect.In this dissertation, some innovations are made in the following four aspects:1) Compare the order policies between loss-averse retailer with loss-neutral retailer. theoretically prove that loss-neutral retailer’s order increases with retail price increasing, decreases with purchase price increasing; but, loss-averse retailer’s order may be increase or decrease with retail price and purchase price increasing, and verify the correctness of conclusions by simulation.2) Loss-averse customer is considered as new perspective, study influence on decision-making behavior of enterprise by customer’s loss-aversion, and incentive problem of enterprise and customer by compensation contract. find that customer’s loss-aversion leads enterprise to reduce order and price, brings detrimental effect to retailer’s performance; however, compensation contract can play incentive effect if compensation amount is in certain range.3) Asymmetric information of loss-aversion is considered, research effect on decision-making of enterprise by loss-averse information, and incentive problem of enterprise and supply chain by contract. results show that when asymmetric loss-averse information of customer is considered, if enterprise underestimates customer’s loss-aversion, which leads enterprise to raise price and order, decreases customer’s utility, whether enterprise underestimates or overestimates customer’s loss-aversion, which would make enterprise’s profit decrease; compensation contract can play incentive effect when enterprise underestimates customer’s loss-aversion, when retailer’s loss-aversion information is asymmetric, manufacturer raises price, retailer reduces order, utilities of retailer and supply chain are decreased when manufacturer underestimates retailer’s loss-aversion, whether manufacturer underestimates or overestimates retailer’s loss-aversion, which would decrease manufacturer’s profit; meanwhile, when buyback price is less than certain range, buyback contract can play incentive effect.4) Take comparative mentality into reference point of loss-aversion, study influence on decision-making behavior of enterprise by comparative mentality, and incentive issue of enterprise and supply chain by contract. results show that when comparative mentality is considered into loss-averse customer, comparative mentality leads enterprise to reduce price and order, performances of enterprise and customer are decreased; if compensation amount is in certain range, compensation contract can play incentive effect. when comparative mentality is considered into loss-averse retailer, comparative mentality leads manufacturer to reduce price, brings retailer to decrease order, performances of manufacturer, retailer and supply chain are decreased; meanwhile, when buyback price is less than certain range, buyback contract can play incentive effect.