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Ordering, Pricing, and Coordination of a Closed-Loop Supply Chain with Risk Preference

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Big Data and Security (ICBDS 2022)

Part of the book series: Communications in Computer and Information Science ((CCIS,volume 1796))

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Abstract

This paper considers the ordering, pricing, and coordination for a closed-loop supply chain (CLSC) made up of a risk-neutral manufacturer, a risk-neutral third-party collector, and a risk-preference retailer. We introduce the M-CVaR criterion depending on two parameters to describe the retailer's risk-preference behavior. The optimal order quantity, wholesale price, and acquisition price of decentralized and centralized decision conditions are found using the backward induction approach and the influences of the risk-averse and pessimistic coefficients on the optimal solutions are investigated using numerical simulations. The findings demonstrate that the optimal order quantity goes up with the risk-averse coefficient and falls down with the pessimistic coefficient in both centralized and decentralized conditions. The more risk-averse the retailer, the higher the manufacturer's wholesale price. The retailer's increased risk-taking and risk aversion tendencies could lead to the market exit. The manufacturer prefers the retailer who is more risk-taking. In the case of risk-taking, the CLSC's expected profit under the centralized condition may be smaller than under the decentralized condition, but in the case of risk-neutrality, the expected profit under the centralized condition is always bigger than that under the decentralized condition. The CLSC can achieve the expected profit under centralized conditions with risk neutrality through revenue-sharing and cost-sharing (RS&CS) contracts.

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Acknowledgments

We are grateful for the Open Fund Project for Nanjing Institute of Technology (JGKB202003), the Research Project for Nanjing Institute of Technology (YKJ201923) and the Research Project for China Society of Logistics (2022CSLKT3–385).

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Correspondence to Ronghua Lu .

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Lu, R., Wu, Y., Xu, F. (2023). Ordering, Pricing, and Coordination of a Closed-Loop Supply Chain with Risk Preference. In: Tian, Y., Ma, T., Jiang, Q., Liu, Q., Khan, M.K. (eds) Big Data and Security. ICBDS 2022. Communications in Computer and Information Science, vol 1796. Springer, Singapore. https://doi.org/10.1007/978-981-99-3300-6_27

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  • DOI: https://doi.org/10.1007/978-981-99-3300-6_27

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