Coordination of a supply chain with loss-averse consumers in service quality. Issue 12 (18th June 2017)

• Record Type: Journal Article
• Authors: Yang, Danqin; Xiao, Tiaojun
• Is Part Of: International journal of production research. Volume 55:Issue 12(2017)
• Page Start: 3411
• Page End: 3430
• Publication Date: 2017-06-18
• Subjects: Supply chain management -- reference effect -- loss-aversion -- coordination mechanism -- game theory; Factory management -- Periodicals; 658.57
• DOI: 10.1080/00207543.2016.1241444
• Languages: English
• ISSNs: 0020-7543

Abstract

Abstract : We develop a two-period game model to study the coordination mechanism for a supply chain with loss-averse consumers who are assumed to have dwindling sensitivity to service quality gain relative to loss. We find that all-unit quantity discount coupling with service subsidy rate can coordinate the retailer's price and service quality decisions together in each period. When consumers become more loss-averse in service quality, the coordinated wholesale price in the first period might increase; whereas that in the second period decreases. With Pareto coordination mechanism, larger loss-aversion might weaken the supplier's bargaining power. We provide managerial insights on how to adjust the coordinated contract when the consumers' loss-aversion and reference value of service quality level change.