Abstract: The risk preference of decision makers can influence the decision-making process of the supply chain. Thus the impact of risk aversion on manufacturer's launching direct channel is studied. Based on game theory's IR and IC under two cases which are single and dual supply chains, the optimal decision-making and social welfare of all members were analyzed. The results show that only when the risk aversion of decision makers and sales costs of direct channel meet certain conditions, the manufacturer launch direct channel. The utility of retailer is not always eroded by direct channel. When the risk aversion of decision makers is high and the direct channel cost is moderate, the supply chain value is reduced. Social welfare always tends to decrease and then increase with the increase of risk aversion of manufacturers.

Key words: dual channel, risk aversion, channel sales costs, direct channel