Loss-averse buyers' optimal procurement decision in a multi-sourcing under e-commerce surroundings

Purpose: With the rapid development of e-commerce, multi-sourcing with supply contracts and spot buying has become more and more popular in reality. The main purpose of the paper is to explore a loss-averse buyer's optimal procurement policy in a multi-sourcing under e-commerce surroundings. Design/methodology/approach: The study introduces the loss aversion utility function to characterize the loss aversion effect and derives a loss-averse buyer's optimal procurement policy in a multi-sourcing with a wholesale price contract and spot market. Findings: A loss-averse buyer could order no items in a wholesale price contract and only needs to replenish commodities from spot market under certain conditions. In addition, the study shows that spot capacity has important influences on a loss-averse buyer's optimal ordering decision in the wholesale price contract. Originality/value: This is the first paper to study the loss aversion effect on a buyer's procurement decision in a multi-sourcing. The results present important managerial insights for a loss-averse buyer to devise optimal ordering policies in a multi-sourcing under e-commerce surroundings.