Abstract Considering retailers’ risk preference, this study employs prospect theory to construct the traditional supply chain model, the trade credit model and the coordination model of trade credit and revenue sharing, and explores the retailers’ optimal decision and coordinated issues of supply chain under the integral decision making and decentralized decision making of each model. Furthermore, the effects of parameters such as trade credit and loss aversion on retailers’ optimal order decision are investigated. The findings show that retailer’s order quantity is directly proportional to trade credit term and revenue sharing coefficient while order quantity is inversely proportional to loss aversion coefficient and wholesale price. The trade credit model is an improvement of the traditional supply chain model and it increases retailers’ order quantity. However, it can’t realize supply chain coordination. On this basis, we introduce revenue sharing mechanism, and thus, the coordination model of trade credit and revenue sharing is established. Finally, supply chain members can achieve Pareto optimality. The objective functions of supply chain members in the three types of models are analyzed and compared through numerical emulation. And this study has discussed parameters setting in the model and examined the effectiveness of the coordination model of trade credit and revenue sharing when it targets at loss aversion retailers.
2017, Vol. 14 
