Closed-loop supply chain on the theory of downside-risk based on third-party collecting

In order to study the impact of risk aversion on the supply chain, a closed loop supply chain model with a risk-neutral manufacturer, a third-party collecting and a downside-risk-averse retailer was established, and the supply chain wasn´t coordinated on the theory of downside-risk control. A revenue and expense sharing contract between manufacturer and third-party collecting was designed. Also a risk-sharing contract composed of revenue and expense sharing contract and return policy between manufacturer and retailer was designed. The contracts could not only offer the desired downside protection to the retailer, but also provide more profits to the agents, and accomplish channel coordination. Lastly, through a numerical example, the effectiveness and feasibility of the contracts is verified.