The retailer´s ordering strategy under buy-back rate risk fluctuating

Based on the analysis of classical buy-back contract´s price, quantity and the maximum buy-back rates, this paper further discusses the retailers´ order strategies when the supplier are able to promise the maximum buy-back rates during the risk fluctuations. In this paper, a mathematical model is established to maximize the profit when buy-back rates risk fluctuates. The paper also discusses different profits variations of retailers and of the entire supply chains whether or not considering the risk fluctuations under three different situations. After knowing the parameters of the risk fluctuations, the best order strategies of retailers will make significant sense. The fluctuations of the risk of buy-back rates would bring down the expected profits of the members of the supply chain, as well as the overall profits of the supply chain. If the retailer does not adjust his order strategies when the risks fluctuate, the expected profits of the entire supply chain will remain the same as the classic buy-back case, while parts of the profits of the retailer will be shifted to the supplier, causing the retailer´s profit losses.