Supply Chain Network Equilibrium with Risk-Averse Members

Abstract

To obtain equilibrium patterns of a competitive supply chain network with stochastic demand, risk-averse channel members, production capacity constraints and price ceilings, we derived the optimization conditions of manufacturers, retailers and demand markets via variational inequality respectively, and then established the whole supply chain network equilibrium problem. Projection and contraction method was utilized to solve the model. Numerical examples were given to illustrate the impact of risk-averse degree of manufacturers and retailers on network equilibrium patterns in case of capacity constraints and price ceilings. The results show that under the same condition, the system profits decrease to a lower level when the manufacturers’ risk degree increase compared with retailers. The retailers bear more loss due to their positions in the supply chain.