Supply Chain Coordination under Asymmetric Risk Aversion Information

Coordination issue is addressed in a supply chain with uncertain demand. The chain consists of one upstream supplier and one downstream retailer, both of whom are risk-averse, and the supplier isn´t quite aware of the retailer´s risk aversion structure. The supplier´s optimal contracts under full information and asymmetric information are derived and compared to investigate the impact of risk aversion and information asymmetry on supply chain performance. Our results demonstrate that both risk aversion and information asymmetry induce inefficient overall performance, although the retailer could benefit from his private information, and the contracts under full information become invalid. Accordingly, channel coordination would be proposed to achieve the Pareto- optimal solutions of the system and news contracts are developed. Finally, a numerical example is utilized to validate the results.