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Published, Version of Record (VoR)CC BY V4.0, Open
Journal article
Optimal Decisions of a Supply Chain With a Risk-Averse Retailer and Portfolio Contracts
IEEE access, v 7, pp 123877-123892
2019
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
In this paper, we investigate a supply chain involving one risk-neutral supplier and one risk-averse retailer, where the retailer adopts the conditional value-at-risk (CVaR) criterion as his performance measure. To hedge against high risk, the retailer purchases call options from the supplier to adjust his firm orders. We derive the optimal order and production policies, with and without a call option contract and demonstrate that the call option contract can benefit both the retailer and the supplier. In addition, we also generate insights regarding how the contract parameters, level of risk aversion and shortage cost impact the retailer's optimal policy, highlighting the importance of considering the risk aversion and shortage cost simultaneously. Finally, we derive the condition for the supply chain to be coordinated and show that compared to non-coordinating contracts, the wholesale price and call option portfolio contracts proposed in this paper can achieve Pareto optimality. Numerical experiments are conducted to demonstrate theoretical results and observations.
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Details
- Title
- Optimal Decisions of a Supply Chain With a Risk-Averse Retailer and Portfolio Contracts
- Creators
- Han Zhao - Tsinghua UniversityShiji Song - Tsinghua UniversityYuli Zhang - Beijing Institute of TechnologyJatinder N. D Gupta - Beijing Institute of TechnologyAnna G Devlin - University of Alabama in Huntsville
- Publication Details
- IEEE access, v 7, pp 123877-123892
- Publisher
- IEEE
- Grant note
- Beijing Institute of Technology (10.13039/501100005085) 2018607202007 / DongGuan Innovative Research Team Program 17BGL140 / National Social Science Fund of China U1660202; 71871023; 61503211 / National Natural Science Foundation of China (10.13039/501100001809)
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Decision Sciences (and Management Information Systems)
- Web of Science ID
- WOS:000487836500007
- Scopus ID
- 2-s2.0-85078339654
- Other Identifier
- 991019168367204721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Computer Science, Information Systems
- Engineering, Electrical & Electronic
- Telecommunications