Abstract: The optimal strategies of a supply chain system which consist of a risk-averse supplier and a risk-averse manufacturer are demonstrated. In order to alleviate the supply uncertainty, more and more enterprises share revenues and risks by investing in upstream suppliers. Under the condition of investment shareholding, how should supply chain member (supplier, manufacturer, etc.) make scientific decisions to maximize profits and minimize risks? Under this background, this paper analyses the optimal ordering and pricing decision of supply chain system. Considering the risk aversion characteristics of enterprises in practice, the risk preference characteristics of manufacturers and suppliers are described by constructing a mean-variance model. At the same time, Nash bargaining model is constructed to capture the process of negotiation between supply chain member in practice. The study presents equilibrium results and proves the existence and uniqueness of the Nash bargaining solutions. It is also found that the optimal supply/purchase quantity of supply chain is the weighted average of the minimum risk supply/purchase quantity of the manufacturer and the supplier, and the weight depends on the degree of risk aversion of the manufacturer and the supplier. Through comparative static analysis of equilibrium contracts, it is found that with the enhancement of negotiation ability of manufacturers, equilibrium price will decrease, utility income of manufacturers will increase, and utility income of corresponding suppliers will decrease; with the increase of risk aversion of manufacturer (supplier), manufacturer (supplier) will choose to accept higher prices and sales; with the increase of shareholding ratio, the volume of supply chain transactions will increase, and the more risk aversion the manufacturer (supplier) gets, the more profit risk the negotiated supply contract will reduce. The results of this study have important implications for supply chain in practice. The model framework of this paper can reflect the pricing and ordering decisions of independent supply chain enterprises, integrated supply chain enterprises and vertical shareholding supply chain enterprises. It provides a theoretical basis and decision guidance for the practice of vertical mergers and acquisitions of supply chain.

Key words: shareholding, risk-averse, Nash bargaining game, mean-variance model