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Risk analysis of a pay to delay capacity reservation contract. (English) Zbl 1113.90015
Summary: This paper addresses a topic of supply chain management from a new perspective: incorporating risk aversion in a supply contract model. A pay to delay capacity reservation contract is analyzed by using the concept of conditional value-at-risk (Cvar). First, we construct the manufacturer’s optimal ordering problem by using the dynamic programming approach. Then, we derive the manufacturer’s optimal ordering strategy and compare our results with those obtained by using expectation performance and mean-variance tradeoff. Finally, numerical results are shown to reveal the impact of risk aversion on the manufacturer’s optimal decisions. The analysis presented in this paper reveals advantages of using the Cvar approach over the mean-variance approach.

MSC:
90B05 Inventory, storage, reservoirs
91B30 Risk theory, insurance (MSC2010)
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