Channel bargaining with loss-averse retailer under general stochastic demand

We consider a channel bargaining problem in a two-echelon supply chain in this paper. Employing a loss-aversion utility function, we model the decision-making behavior of a loss-averse retailer and a risk-neutral manufacturer which is very common in practice. By investigating the equilibrium optimal order quantity and the equilibrium optimal wholesale price, we find that there exit equilibria for the equal bargaining power problem as well as for the unequal bargaining power problem. By analyzing the impacts on the equilibria and profit allocations and assuming the stochastic demand follows a uniform distribution with support over [0, b], we find that equilibrium wholesale price and the manufacturer's share of supply chain are not changing with the uniform demand distribution upper bound. However, equilibrium order quantity is strictly increasing with the uniform demand distribution upper bound.