Supply Chain Contracts And Its Experimental Study Based On Risk And Fairness Preference

In the21st century, the competition between enterprises gradually changes into the competition between the supply chains. Supply chain management has become the focus of the academic and the business. The contract of supply chain is the basis of supply chain management, which is an effective mechanism to achieve the supply chain coordination and optimize the performance of supply chain. There are many literatures in the field of supply chain contract. But the existing literatures are mostly theoretical research based on the assumption that the decision-makers are risk neutral and fair neutral. In recent years, behavioral operations management and its experimental study tell us that the behavioral factors like risk preference and fairness preference make people do not always maximize their profits, which leads to a new research direction in the study of supply chain contract.Three kinds of supply chain contract are studied in this thesis based on the preferences of risk and fairness. Supply chain contract models are constructed based on the preferences risk and fairness under stochastic demand. Some experiments for the study of supply chain contracts are designed and implemented. By controlling the conditions of the experiments, the effect of risk preference on decision of the suppliers and retailers is studied. And then the effect of preference of risk and fairness preference on the supply chain contract is studied. The behaviors are compared with that of the suppliers and retailers with risk-neutral, fair-neutral preferences. A combination of research methods of literature analysis, theoretical modeling and experimental studies are employed in the thesis. We try to make a useful complement to the traditional study of supply chain contracts with theoretical models and experimental studies. The main contents and conclusions are as follows:Based on the description of the basic models of the traditional supply chain contract, two kinds of contract and their coordination to the supply chain with demand information updating are studied in chapter2. One contract is designed for the supply chain system with long production lead time and no replenishment opportunity for the retailers. Another is designed for the supply chain system that the manufacturer has two modes of fast and slow production, and the retailers can order in two-stage.In chapter3, a conditional value at risk model (CVaR) is established with different risk preferences for newsboy. The optimal decision of newsboy is analyzed. With respect to the existing literature, the method for the CVaR model in this thesis is more intuitive and easy to understand. Base on the wholesale price contract with stackelberg game, the suppliers’optimal decision is analyzed with risk aversion or risk taking retailers respectively. And the coordination conditions of the buy-back contract and revenue sharing contract are also studied. The effects of the retailer’s risk preference on the supply chain coordination and the contract parameters are revealed.In chapter4, A CVaR model for suppliers is established. According to the combination of the supplier and the retailer’s risk preference, a buy-back contract of the supply chain based on the Stackelberg game is analyzed. Respectively, from the view of the retailers and suppliers, we compared the impact of the decision-makers risk attitude on both revenue and supply chain performance. Numerical simulation is applied to find if the supply chain can be coordinated by the suppliers and retailers with different risk preference.In chapter5, based on wholesale price contract, buy-back contract and revenue sharing contract, experiments are designed, in which one decision-maker is the computer, and another one is the employed student. Based on the theory of risk-neutral contract, some hypotheses are given, and they are tested by statistical analysis. Dynamic panel data model is applied to study the impact factors of the suppliers’and the retailers’ decision behavior. The coefficient of the retailer’s risk preference is estimated by using ordinary least squares (OLS) method. And the supplier’s risk preference is analyzed qualitatively.In chapter6, based on the wholesale price contract, buy-back contract and revenue sharing contract, the supply chain decision problems are studied with risk and fairness preference participants by experimental analysis. The difference of supply chain efficiency and decision-makers behavior among the three contracts are also analyzed, which compared with the experimental results that consider only risk preference. When both of the decision-makers consider of fairness and reciprocity, the changes of the suppliers’and retailers’behavior are discussed.Experimental study found that, in the experiments of considering the risk preference only, the order quantity of the retailers is not always equal to the theoretical benchmark. In theory, buy-back contract and revenue sharing contract can coordinate the supply chain, but in the experiments, the order quantity is significantly less than the benchmark, and the supply chain can not achieve coordination. Compared with the wholesale price contract, both the contracts can significantly improve the efficiency of the supply chain. In mathematics, the buy-back contract equals to the revenue sharing contract, but in practice, they are not completely equivalent. Retailers always anchor and chase the demand. The estimation results of the risk preference indicate that most of the individuals have significant risk preference. The results tell us that risk preference is the main factor that makes the order quantity deviate from the benchmark. The results of the buy-back contract experiment for suppliers tell us that suppliers are risk-neutral or risk-aversion. The set of the price in the contracts can not coordinate the supply chain.In the experiment of considering the factors of risk and fairness, fairness preference does not significantly change the retailer’s risk attitude under the wholesale price contract and revenue sharing contract. In the buy-back contract, fairness preference mitigates the risk aversion of the retailers. Compared with the fair-neutral experiment, after considering fairness preference, risk taking is the main risk preference of the suppliers. They offered significant low prices, which makes the share of profits for the retails and the order quantity increase. The results show us that the suppliers like to take on more market risk in order to expand the sales. In the multi-period game of the suppliers and retailers, both decisions are significantly affected by the fairness preference. But in the long term, the retailers did not significantly reduce the order quantity according to the unfairness, which tells us that the retailers and suppliers achieve a kind of "fairness balance".