Abstract: By incorporating overconfidence into the model, a twoechelon supply chain composed of one supplier and one overconfident retailer is investigated and their decisionmaking is analyzed. It is shown that if the retailer is overconfident, the supply chain can achieve coordination. However, supply chain coordination may be destroyed under the buyback contract of the supplier. If the retailer gets the adverse market information, the buyback contract would fail. On the contrary, if the retailer has favorable information, the suppliers profit would decrease with increase of the overconfidence degree. Furthermore, by introducing a revenue sharing contract into the model, the retailers order quantity and the suppliers profit are greatly improved so as to achieve supply chain coordination. Finally, numerical examples are given to illustrate and confirm the obtained results.

Key words: supply chain coordination, overconfidence, buyback contract