Study on Marine Shipping Contract Allocation and Pricing Policy on Shipper´s Loss Aversion

Loss averse effect theory is introduced in a Sea-cargo Supply Chain composed of one carrier , one forwarder and a downstream customer market which is affected by loss averse effect and the information of customer´s loss averse is asymmetric. The carrier´s profit is affected by both spot price and demand of downstream customer market. This paper analyses how the loss averse effect of downstream customer can affect the decision of carrier to maximize its profit through contract price. Further more, this paper does research on centralized supply chain and decentralized supply chain and pays more attention on decentralized one. The final result of this research shows that if carrier wants to maximize its profit, lower loss averse contract price must be employed compared with risk neutral contract price and the more loss averse customer is, the lower the contract price will be.