Sustainability Analysis of Supply Chains with Fashion Products under Alternative Power Structures and Loss-Averse Supplier

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Abstract
Considering a supply chain with fashion products comprising of a supplier and a retailer, we study the sustainability of the supply chain with alternative power structures (either the supplier or the retailer has the option of acting as a leader to make the decisions first). We also examine the impact of the supplier’s attitudes to loss on the supply chain’s sustainability and profitability. We build game theoretical modes to characterize one property of the fashion industry: the wide use of buy-back contract, and obtain the following results: (1) Compared to wholesale price contract, buy-back contract reduces the sustainability of the supply chain, and this result is robust with alternative power structures. (2) Under alternative power structure, the sustainability index is increasing in the buy-back price in the supplier-as-the-leader scenario, while decreasing in the retailer-as-the-leader scenario. That is, the relationships between sustainability and buy-back price is completely reversed when the leader is changed. (3) The sustainability is improved when the supplier acts as the leader and the buy-back price is lower than a threshold, but the contrary holds when the buy-back price is high. (4) Buy-back contract helps to improve the sustainability of the supply chain when supplier is extremely loss-averse, because the loss-averse supplier has the incentives to reduce the ordering quantity as well as the overstocking risk.
Funding Information
  • National Natural Science Foundation of China (71201175, 71301032, 71571194)
  • Foundation for the Excellent Youth Scholars of Guangdong Universities and Colleges (YQ2015014, YQ2015078)
  • Grants from the Hong Kong Polytechnic University (Project No. G-UA7Y)

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