Abstract:
In order to reflect the effect of risk aversion of actors on the pricing strategy of a supply
chain system, a supply chain model, in which manufacturers and logistics service suppliers both are
risk averse, was established under the hypothesis that the market demands are influenced by the
prices. The utility function was derived by certainty equivalent method to depict the risk-averse feature
of the logistics service suppliers and manufacturers. As a result, the following was revealed: In
decentralized decision-making, when the logistics service suppliers are risk neutral, the optimal
logistics price is independent of the risk preference of the manufacturers; and when the logistics service
suppliers are risk averse, the optimal logistics price, as the increasing function of the risk-aversion
degree of manufacturers but the decreasing function of the risk-aversion degree of logistics service
suppliers, will be smaller than that with risk-neutral suppliers. In centralized decision, the supply
chain system will produce residual profits when the manufacturers are risk neutral. Loss of profits will
be caused, however, when the manufacturers are risk averse and the risk-aversion degree exceeds a
critical value. In this case, the logistics service suppliers and manufacturers should adopt decentralized
decision. In contrast, if the risk-aversion degree of the manufacturers is below the critical value, the
supply chain system will produce residual profits, and centralized decision should be selected.