Analysing consumer RP in a dual-channel supply chain with a risk-averse retailer

Abstract

This paper investigates a dual-channel supply chain consisting of a risk-neutral manufacturer and a risk-averse retailer. The manufacturer offers a consumer RP in the online channel, in which consumers face valuation uncertainty. We use conditional value-at-risk (CVaR) criterion to evaluate the risk-averse behaviour of the retailer. We examine how consumer RP and risk-averse behaviour influence the equilibrium solutions and supply chain agents' performance. It is shown that the manufacturer's optimal RP is related to consumer types. If the consumer has a moderate valuation of the product, the optimal RP depending on the retailer's risk-averse level. We observe a counter-intuitive phenomenon; the retailer's expected utility may increase under the double pressure of manufacturer encroachment and better returns service. Furthermore, a buyback revenue-sharing contract is offered to coordinate the dual-channel supply chain when the refund is endogenous. Finally, we explore several extensions. [Received 25 July 2015; Revised 27 October 2016; Accepted 13 November 2016]