Abstract:PurposeBased on the traditional buyback model, this paper aims to propose a new buyback method – the variable buyback contract – to solve the serious inventory backlog in the current economic situation.Design/methodology/approachIn this paper, the authors further study the buyback problem in a two-level supply chain with uncertain … Show more
“…Su (2009) establishes a consumer return policy model and uses the model to prove that the consumer return policy may distort the incentives under the common supply contracts (such as buyback). Liu et al (2020) study the buyback problem in a two-level supply chain with uncertain demand.…”
Purpose
The purpose of this paper is to examine how customers’ self-control affects their purchase decisions and to discuss the pricing decisions of the retailer under different forms of contract.
Design/methodology/approach
The authors use the literature on hyperbolic discounting to model customers’ self-control problems. In this framework, the authors examine how the customers’ self-control affects the optimal pricing decision and the selection of the optimal contract form when there is a supplier and a retailer in the supply chain.
Findings
The study’s results show that when wholesale price contract is compared with buyback contract, buyback contract is better when customers’ self-control is weak; when quantity-discount contract is compared with wholesale price contract and buyback contract, although quantity discount can encourage customers to purchase more units of products, but both wholesale price contract and buyback contract can be better than quantity-discount contract in some cases. Additionally, the authors demonstrate that revenue sharing contract can increase the supply chain’s profit. The authors also find that sometimes customers’ preplan will lead to the result that the supplier produces more unhealthy products.
Originality/value
To the best of the authors’ knowledge, this is the first study to analyze the decision-making of the retailer by developing an analytical framework combining customer’s self-control and supply chain contract. These results have important implications for the supplier and the retailer that sell vice goods.
“…Su (2009) establishes a consumer return policy model and uses the model to prove that the consumer return policy may distort the incentives under the common supply contracts (such as buyback). Liu et al (2020) study the buyback problem in a two-level supply chain with uncertain demand.…”
Purpose
The purpose of this paper is to examine how customers’ self-control affects their purchase decisions and to discuss the pricing decisions of the retailer under different forms of contract.
Design/methodology/approach
The authors use the literature on hyperbolic discounting to model customers’ self-control problems. In this framework, the authors examine how the customers’ self-control affects the optimal pricing decision and the selection of the optimal contract form when there is a supplier and a retailer in the supply chain.
Findings
The study’s results show that when wholesale price contract is compared with buyback contract, buyback contract is better when customers’ self-control is weak; when quantity-discount contract is compared with wholesale price contract and buyback contract, although quantity discount can encourage customers to purchase more units of products, but both wholesale price contract and buyback contract can be better than quantity-discount contract in some cases. Additionally, the authors demonstrate that revenue sharing contract can increase the supply chain’s profit. The authors also find that sometimes customers’ preplan will lead to the result that the supplier produces more unhealthy products.
Originality/value
To the best of the authors’ knowledge, this is the first study to analyze the decision-making of the retailer by developing an analytical framework combining customer’s self-control and supply chain contract. These results have important implications for the supplier and the retailer that sell vice goods.
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