Study on Behavioral Preference and Utility Coordination Evaluation in Supply Chains

Abstract

Behavioral issues become one of the main concerns of research on supply chain coordination. Within the frame-work of Behavioral Decision Theory, the impact of reference point and gains risk aversion/losses risk seeking effects is respectively investigated on supply chain performance under Pareto optimality criterion. It indicates that for the former the relative risk of losses in supply chains is still shared among those agents with the least loss aversion while the optimal order quantity decreases; for the later the influence depends on parameters and aversion coefficients. Furthermore, an original coordination evaluation criterion combining group utility function with Pareto optimality principle is presented to incorporate heterogeneous utility structures. Then the procedure is developed and a numerical example is also included.