Complex dynamic analysis of risk-averse newsvendor models with buyback guarantee financing

Abstract

In the framework of the newsvendor model, both single- and multi-period models are proposed to investigate the ordering strategy of a risk-averse retailer under buyback guarantee financing (BGF) and stochastic demand. In the single-period model, the classical newsvendor is extended by introducing risk aversion and capital constraints simultaneously. It is found that the optimal ordering quantity is a monotonic function in some parameters, such as increasing in the retailer's risk aversion and salvage value, while decreasing in the initial capital and wholesale price. The multi-period model is a dynamical model described by the bounded rationality decision adjustment rules. We then investigate the complex dynamics they admit, such as period-doubling bifurcation and chaotic phenomena, and have found that the dynamical models experience more complex behaviour than their static counterpart. Furthermore, in the dynamical case, we could see periodic, bifurcating or chaotic changes in ordering quantity. We also investigate the influence of BGF on ordering quantity, which may lead to a risk-averse retailer to order aggressively. Finally, some numerical simulations are given to illustrate the theoretical results and some suggestions are also provided.

Keywords:

• Risk aversion
• CVaR (conditional-value-at-risk)
• supply chain finance
• newsvendor model
• dynamic analysis

Acknowledgments

The presented work was supported by the Chinese National Funding of Social Science (19BGL094, Operational Strategy and Guidance Mechanism of Financing Joint Low Carbon in Agricultural Supply Chain), the National Natural Science Foundation of China (72072041,72001048), Humanities and Social Sciences Research and Planning Fund of the Ministry of Education of China (20YJA630053), and the Natural Science Foundation of Guangdong Province (G172071082).

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by Chinese National Funding of Social Sciences [19BGL094], National Natural Science Foundation of China [72072041, 72001048] and Natural Science Foundation of Guangdong Province [G172071082].

Notes on contributors

Jianxin Chen

Jianxin Chen is an associate professor in School of Management at Guangdong University of Technology, China. She received her BSc in Applied Mathematics from Shandong Normal University, China, in 2001, and her MSc and PhD in Applied Mathematics and in Management Science from South China Normal University and Jinan University, China, in 2004 and 2012, respectively. Her research interests are supply chain financing, the optimisation of the capital-constrained and averse supply chain. She has published research papers in International Journal of Production Research, Computers & Operations Research, Asia-Pacific Journal of Operational Research, and Mathematics and Computers in Simulation.

Tonghua Zhang

Rui Hou is a professor and deputy dean of Management Science and Engineering in the School of Management from the Guangdong University of Technology, China. He received his PhD in 2011 from the School of Business Administration at the South China University of Technology. His research interests include social and economic system modelling, omni-channel supply chain management, and platform economy and operation management. He has published papers in peer-referred international journals such as European Journal of Operational Research and Journal of the Operational Research Society.

Yong-wu Zhou

Dr. Tonghua Zhang is an applied mathematician from Swinburne University of Technology, Australia. He received his PhD in Applied Mathematics from Shanghai Jiao Tong University in 2005. His research focuses on Nonlinear Dynamical Systems generated by Differential and Difference Equations and their applications in Science, Engineering and Management Science and Engineering. His publications appear in International Journal of Production Research, Computers & Operations Research, Nonlinear Dynamics, Nonlinearity, Chaos, and Physical Review E.

Rui Hou

Yong-Wu Zhou is a professor in School of Business Administration at South China University of Technology, China. He received his BSc in Applied Mathematics from Anhui Normal University, China, in 1985, and his MSc and PhD in Applied Mathematics and in Management Science from Northwestern Polytechnical University and Hefei University of Technology, China, in 1987 and 2002, respectively. His current research interests are logistics and supply chain management, Inventory Control and Management and Service Operation Management. He has published research papers in IIE Transactions, Omega, European Journal of the Operational Research, International Journal of Production Research, International Journal of Production Economics and Computers & Operations Research.