A supply chain consisting of one manufacturer , one seller , and a group of customers with strategic behavior and risk preference is considered in this paper. Under strategic customer behavior and risk prefer ence , the seller ’ s pricing and inventory decisions are analyzed. Supply chain profit sharing contract is studied under rational expectations equilibrium. Results show that the seller ’ profit decreases as customer ’ s risk pref erence increases , and the seller would have to lower product price and initial inventory so as to mitigate profit reduction. The wholesale price of the profit sharing contract should be set above manufacturer ’ s marginal pro duction cost because of the existence of strategic customers. Moreover , the sharing ratio parameter within the profit sharing contract benefits redistribution of the total profit of the supply chain. The bargaining powers of supply chain members determine the sharing ratio parameter.