Supply Chain Coordination with a RiskAverse Retailer

Coordination issue is addressed for a supply chain with a riskaverse retailer. The tradeoff between expected profit and the probability of reaching or exceeding this value is employed to characterize the preference of the retailer, and the impact of this risk aversion on supply chain performance is investigated. The traditional coordinating contracts are demonstrated to achieve no complete coordination; therefore, a new flexible contract is proposed. Three kinds of risk aversion are compared to show that difference model leads to difference coordination. The results provide some decisionmaking basis for agents in practical supply chains.