Abstract: Considering that the traditional supply chains wholesale price mechanism cant coordinate the supply chain, which leads to poor profits for both the supplier and retailer, from the perspective of supply chain members attitude towards risk, a supply chain contract was proposed which combines the insurance mechanism. The contract is based on the wholesale price mechanism model, introducing two characteristic parameters (insurance price r and the retailer bear the risk of loss proportion θ) to characterize the uncertainty of market demand. Our study has shown that the introduction of the contract can coordinate the supply chain and improve the overall profits. In addition, the effects of agents risk preferences and negotiating powers on the distribution of supply chains excessive profits were also investigated.

Key words: supply chain, insurance contract, wholesale price contract, risk preferences, negotiating power