Impacts of Consumer Market Search Behavior on Retailers’ Decision-Making With Risk Considerations

Abstract

In recent years, the impact of human behavioral issues on the supply chain decision making is to arouse higher attention, such as risk attitude and so on. Behavioral factors, such as risk aversion, can directly influence a manager’s procurement decisions. In this paper, we focus on the impact of a retailer’s risk aversion on its decision making considering the consumer market search behavior. We select a single product supply chain system, which consists of one manufacturer and two retailers. By the theoretical analysis, we find that the customer market search behavior can promote the retailers’ order quantity, for there is probability that retailers are in short supply. At the same time, the risk-averse attitude will make the retailer tend to conservative. For example, a risk-averse retailer tends to order more products comparing to a risk-neutral one. So the retailer with risk aversion should make a trade-off and we explore the bilateral influence of risk attitude and shortage penalty.