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

Xinsheng Xu, Ping Ji, Felix T.S. Chan (Corresponding Author)

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

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.

Original languageEnglish
JournalIndustrial Management & Data Systems
Early online date28 Jun 2022
DOIs
Publication statusE-pub ahead of print - 28 Jun 2022

Keywords

  • Loss aversion
  • Modeling
  • Multi-sourcing
  • Spot buying
  • e-commerce

ASJC Scopus subject areas

  • Management Information Systems
  • Industrial relations
  • Computer Science Applications
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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