Influences of risk-aversion behavior and purchasing option in a cross-border dual-channel supply chain

Chen, Xue, Li, Bo, Song, Dongping and Wang, Minxue (2023) Influences of risk-aversion behavior and purchasing option in a cross-border dual-channel supply chain. INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH.

Text Chen_Xue_accepted_version.docx - Author Accepted Manuscript Access to this file is embargoed until 5 July 2025. Download (966kB)

Abstract

<jats:title>Abstract</jats:title><jats:p>Considering the rapid development of cross‐border e‐commerce, this paper constructs a cross‐border dual‐channel supply chain with a supplier and a retailer in different countries. The supplier directly sells products to overseas market through an online channel and a retail channel. Since the supplier expands the overseas market and bears the potential risk of exchange rate volatility, the supplier is risk‐averse. In the presence of exchange rate volatility, the risk‐averse supplier decides whether to purchase an option to hedge against the risk of exchange rate volatility. Conditional value at risk is applied as a measure of the supplier's risk‐averse behavior. To identify the conditions under which the risk‐averse supplier should purchase an option, we analyze two scenarios: the benchmark model and the option model. By comparing the benchmark model with the option model, we show that if the option premium is lower than a threshold, the risk‐averse supplier prefers to purchase an option, which also makes the retailer better off. Interestingly, when the supplier becomes less risk‐averse, as the exchange rate volatility increases, both players benefit a higher utility in the option model. Finally, we verify the results’ robustness using numerical analysis.</jats:p>

Item Type:	Article
Uncontrolled Keywords:	cross-border dual-channel supply chain, exchange rate, option, pricing decisions, risk-aversion behavior
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	18 Jul 2023 09:24
Last Modified:	23 Aug 2023 23:37
DOI:	10.1111/itor.13345
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3171681