Modeling Capacity Reservation Contract Based on CVaR Model

Traditional papers about supply chain generally assume the parties in the supply chain are all risk-neutral.But the managers in the practice also concern the risk besides the revenue.The capacity reservation contract is an important kind of contracts used in practice to manage the risk according to flexible design.This paper analysis the capacity reservation contract by the Conditional Value-at-Risk which always used to measure risk in finance,and proposes the optimization models under risk-neutral and risk-aversion assumptions.The models illustrate the risk attitude of retailer in the supply chain has important influence to the optimal quantity of capacity reservation.Higher attitude of risk aversion is,smaller optimal quantity of capacity reservation is.The models are also validated by numerical examples.