Option Contract for a Retailer-Led Supply Chain with Uncertain Demand and Selling Price

DOI

10.2991/978-94-6463-570-6_36How to use a DOI?

Keywords

Option contract; supply chain coordination; stochastic demand; uncertain selling price

Abstract

This paper considers a two-echelon (supplier & retailer) supply chain under random market needs, where the retailer has the predominance in the supply chain, and the selling price is completely hinge on market demand. We employ an option contract to coordinate the supply chain, and discuss the impact of the demand sensitivity on the optimal order/assembly quantity and contact parameters for the purpose of improving supply chain performance. The conclusion of this paper is the supply chain can be coordinated through option contract, and the option premium is inversely correlated with the exercise price under supply chain coordiantion. Given the option price is constant under supply chain coordination, the strike price increases with the demand sensitivity.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Fuyou Huang
AU  - Zhe Gao
PY  - 2024
DA  - 2024/11/22
TI  - Option Contract for a Retailer-Led Supply Chain with Uncertain Demand and Selling Price
BT  - Proceedings of the 2024 5th International Conference on Management Science and Engineering Management (ICMSEM 2024)
PB  - Atlantis Press
SP  - 347
EP  - 353
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-570-6_36
DO  - 10.2991/978-94-6463-570-6_36
ID  - Huang2024
ER  -