Dual-Channel Supply Chain Coordination When the Retailer Has Different Risk Preferences

Consider a two-channel supply chain which contains a manufacturer with no risk concerns, while retailers have different risk preferences. Retailer's risk appetite is characterized with two risk factors that establish a unified framework to measure risk neutrality, risk aversion and risk seeking behavior. In addition, a Stackelberg game is established, the manufacturer acts as the leader while the retailer acts as the follower. Through analysis, two meaningful conclusions are drawn: (1) Both risk parameters have a significant impact to retailer's order quantity and retail price, and the impact is just the opposite. (2) Introducing a two-way revenue sharing contract to achieve this two-channel supply chain coordination. Experimental evidence indicates that there is a Pareto area, and both members can achieve a win-win result.