Supply chain with wholesale price contract under inequity aversion and random yield

Abstract

The effect of inequity aversion on supply chain with random yield and random demand was studied. Based on disadvantageous inequity aversion and advantageous inequity aversion, a model of wholesale price contract with random yield and random demand was established, the optimal ordering quantity of the retailer in different situations was obtained and the influence of fairness preferences on retailer7 s optimal ordering quantity and supply chain coordination was analyzed. Finally, numerical examples were presented to illustrate the theoretical results. This research shows that the wholesale price contract can not achieve supply chain coordination for the fair neutral retailer. However, when the retailer has extreme advantageous inequity aversion, the wholesale price contract can improve the profit of the whole supply chain and better coordinate the supply chain, which extends the theory and application of the traditional wholesale price contract in real life.