A Computational Study of Risk-Averse Parameter Effects on a 2-Stage Supply Chain Coordination under Refund-Dependent Demand

Abstract

This paper examines a 2-stage supply chain that features a buyback contract between manufacturer and retailer under uncertain demand and consumer returns policy with partial refund amount. The supply chain is optimized using the utility of profit that includes the mean and variance of profit. The optimal values of buyback price, wholesale price, and retailer's order quantity are determined for the coordination situation of the decentralized supply chain when its members are risk averse. Through a computational study, the impacts of the supply chain members' risk attitudes and refund amount on the optimal decisions are investigated for the uncoordinated supply chain where one of the agents makes off-optimal decision.