Store brand introduction in a two-echelon logistics system with a risk-averse retailer

We study a risk-averse retailer’s optimal decision of introducing her store brand product by using the mean–variance formulation. The effects of the substitution factor, the capital constraint, and the development cost are examined. Taking the product quantities as the decision variables, the risk deducted surplus of the store brand product and the substitution factor play a vital role in the retailer’s optimal policies. Both the capital constraint and the development cost reduce the mean–variance efficient solution set of the retailer and hence distort the risk management of the retailer. Some meaningful insights are generated.

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