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Environmentally Friendly Supplier Selection Using Prospect Theory

Author

Listed:
  • Wei Song

    (School of Economics and Management, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China)

  • Zhiya Chen

    (School of Economics and Management, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China)

  • Xuping Wang

    (Faculty of Management and Economics, Dalian University of Technology, Dalian 116024, China)

  • Qian Wang

    (School of Economics and Management, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China)

  • Chenghua Shi

    (School of Economics and Management, Hebei University of Engineering, No. 199, Guangming South Street, Handan 056038, China)

  • Wei Zhao

    (School of Computer, Xidian University, No. 2 Taibai South Street, Xi’an 710071, China)

Abstract

This paper proposes an optimal selection method to address the real-world problem of environmentally friendly supplier selection, based on prospect theory. This study adopted the manufacturer’s point of view, and considered the manufacturer’s psychological and behavioral factors in the process of choosing suppliers. The first step was to build supplier-selection indexes for manufacturers. Then, the study assessed the attribute of manufacturer expectations as a reference point. Next, index gains and losses were evaluated against the expectation reference point, yielding a payoff matrix and loss matrix. Finally, the study used prospect theory to calculate the comprehensive prospect value of each supplier; comprehensive prospect values were sorted in descending order to help manufacturers make the best choice.

Suggested Citation

  • Wei Song & Zhiya Chen & Xuping Wang & Qian Wang & Chenghua Shi & Wei Zhao, 2017. "Environmentally Friendly Supplier Selection Using Prospect Theory," Sustainability, MDPI, vol. 9(3), pages 1-17, March.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:3:p:377-:d:92190
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    References listed on IDEAS

    as
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    Cited by:

    1. Patchara Phochanikorn & Chunqiao Tan, 2019. "An Integrated Multi-Criteria Decision-Making Model Based on Prospect Theory for Green Supplier Selection under Uncertain Environment: A Case Study of the Thailand Palm Oil Products Industry," Sustainability, MDPI, vol. 11(7), pages 1-22, March.

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