Supply Chain Contracting with Linear Utility Function

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Author(s): Ningning Wang (University of Science and Technology of China, China), Jibao Gu (University of Science and Technology of China, China), Qinglong Gou (University of Science and Technology of China, China)and Jinfeng Yue (Middle Tennessee State University, USA)
Copyright: 2020
Pages: 20
Source title: Supply Chain and Logistics Management: Concepts, Methodologies, Tools, and Applications
Source Author(s)/Editor(s): Information Resources Management Association (USA)
DOI: 10.4018/978-1-7998-0945-6.ch035

Keywords: Business & Management / Business Science Reference / Operations and Service Management / Supply Chain Management

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Abstract

The supply chain contracting has traditionally been based on the profit maximization assumption. Recent research has shown that some behavior factors may influence the decision making of supply chain members. The authors utilize a linear utility function to depict such behavior factors and incorporate these into the newsvendor model. The linear utility function provides sufficient flexibility to better capture people's various behavior factors. By supposing the agents are concerned with behavior factors, the authors first investigate how the factors affect the supply chain under wholesale price contract, and find that they do not influence coordination condition, but can adjust the distribution of profits. Then they extend their study to other four common contracts with a similar method and systematically demonstrate that the behavior of agents in such a linear setting has no effect on the conditions of coordinating supply chain.

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Supply Chain Contracting with Linear Utility Function

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