Impact of risk aversion on optimal decisions in supply contracts

Jun Wu, Shouyang Wang, Xiuli Chao, Chi To Ng, Edwin Tai Chiu Cheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

59 Citations (Scopus)

Abstract

We introduce the concept of conditional value-at-risk as the evaluation criterion in a supply contract model. We first derive the manufacturer's optimal decisions and then analyze the impact of risk aversion on the manufacturer's decisions. We follow by conducting numerical experiments to observe how the manufacturer's risk attitude affects his decisions. We obtain results that characterize the explicit relationship between the manufacturer's risk attitude and his optimal decisions. We also show the dependence of the decision variables on the price and cost parameters, which is seldom given in the literature.
Original languageEnglish
Pages (from-to)569-576
Number of pages8
JournalInternational Journal of Production Economics
Volume128
Issue number2
DOIs
Publication statusPublished - 1 Dec 2010

Keywords

  • Conditional value-at-risk
  • Risk analysis
  • Supply chain management

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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