Loss-averse buyers' optimal procurement decision in a multi-sourcing under e-commerce surroundings
Industrial Management & Data Systems
ISSN: 0263-5577
Article publication date: 28 June 2022
Issue publication date: 16 August 2022
Abstract
Purpose
With the rapid development of e-commerce, multi-sourcing with supply contracts and spot buying has become more and more popular in reality. The main purpose of the paper is to explore a loss-averse buyer's optimal procurement policy in a multi-sourcing under e-commerce surroundings.
Design/methodology/approach
The study introduces the loss aversion utility function to characterize the loss aversion effect and derives a loss-averse buyer's optimal procurement policy in a multi-sourcing with a wholesale price contract and spot market.
Findings
A loss-averse buyer could order no items in a wholesale price contract and only needs to replenish commodities from spot market under certain conditions. In addition, the study shows that spot capacity has important influences on a loss-averse buyer's optimal ordering decision in the wholesale price contract.
Originality/value
This is the first paper to study the loss aversion effect on a buyer's procurement decision in a multi-sourcing. The results present important managerial insights for a loss-averse buyer to devise optimal ordering policies in a multi-sourcing under e-commerce surroundings.
Keywords
Acknowledgements
The authors would like to thank the editor and anonymous reviewer for their valuable comments and suggestions, which help us to improve the quality of the paper greatly. This work was supported by the National Natural Science Foundation of China (Project No. 71871026) and partially supported by a grant from The Hong Kong Polytechnic University of China (Project No. UAHR).
Conflicts of interest: The authors declare no conflict of interest in the research.
Citation
Xu, X., Ji, P. and Chan, F.T.S. (2022), "Loss-averse buyers' optimal procurement decision in a multi-sourcing under e-commerce surroundings", Industrial Management & Data Systems, Vol. 122 No. 8, pp. 1787-1815. https://doi.org/10.1108/IMDS-12-2021-0757
Publisher
:Emerald Publishing Limited
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