Risk sharing in two-level supply chain with risk aversion supplier

A reasonable risk sharing between the partners is the key point of the construction and the effective operation of a supply chain. In this paper, we discussed the risk sharing in a two level supply chain which consisted of a risk neutral dominant retailer and a risk aversion supplier from the perspective of the supplier; we proposed a risk sharing model and the supplier´s optimal production under the flexibility contract. Study found that, we could coordinate the inventory risk though the contract parameters {α, w}, and achieved the supply chain cooperation.