Dynamic recovery strategy for disrupted supply chain under reference price effect
To meet time-varying demand in supply disruptions,recovery decisions need to be adjusted over time,whereas static strategies cannot solve this problem.Based on the differential game theory,this paper proposes two recovery strategies:Static recovery and dynamic recovery.By considering the impact of the reference price effect on dynamic demand,we study the optimal recovery effort level and reference price in a finite time horizon.The two-way cost-sharing contract is designed to achieve supply chain coordination.We show that the dynamic recovery strategy is more favorable and the optimal recovery effort level decreases with time at a decreasing rate.The supply chain members are inclined to make an effort in higher levels of the recovery effort and use contract to coordinate supply chain for longer-lasting disruptions and consumers with high loyalty for products and sensitivity to reference prices.The two-way cost-sharing contract can achieve Pareto improvement only when the marginal profit rate difference between the supplier and manufacturer is in a small range.Finally,the original model is extended to analyze the situations considering the discount factor,and the robustness of the model is verified.This study can provide decisions for the dynamic recovery of supply chain while considering consumer behavior factors in a finite time horizon.
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