Manufacturer´s Return Policy for Two Risk-Averse Competing Retailers

This paper studies the manufacturer´s return policy and the retailers´ decisions in a supply chain consisting of one manufacturer and two competing and risk-averse retailers under a single-period framework. The manufacturer sells her short-life-cycle products through two competing retailers, and the product demand is random and sensitive to the retailers´ selling prices. We incorporate the risk measure CVaR into the supply chain model to characterize riskaverse retailers so that the retailers´ decisions are based upon risk minimization rather than expected profit maximization. We also model the interaction of the manufacturer and the retailers as a manufacturer-Stackelberg game in which the manufacturer acts as a Stackelberg leader, and the retailers act as followers and engage in a simultaneousmove subgame. We conduct a numerical analysis, focusing on identical retailers and a particular demand distribution, and discusses the effects of risk aversion on the chain members´ decisions and profits.