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Coordination of Supply Chains with Bidirectional Option Contracts

In: Contract Analysis and Design for Supply Chains with Stochastic Demand

Author

Listed:
  • Yingxue Zhao

    (University of International Business and Economics)

  • Xiaoge Meng

    (Beijing University of Aeronautics and Astronautics)

  • Shouyang Wang

    (Academy of Mathematics and Systems Science)

  • T. C. Edwin Cheng

    (The Hong Kong Polytechnic University)

Abstract

Chapter 5 extends the concept of single directional option to develop a supply contract for a two-echelon manufacturer-retailer supply chain with a bidirectional option for which it may be exercised as either a call option or a put option. With a general demand distribution, the research derives closed-form expressions for the retailers optimal order strategies under the bidirectional option contract, including the optimal initial order strategy and the optimal option purchasing strategy. The research also analytically examines the feedback effects of the bidirectional option on the retailers initial order strategy. In addition, a chain-wide perspective is taken to explore how the bidirectional option contract can be designed for supply chain coordination.

Suggested Citation

  • Yingxue Zhao & Xiaoge Meng & Shouyang Wang & T. C. Edwin Cheng, 2016. "Coordination of Supply Chains with Bidirectional Option Contracts," International Series in Operations Research & Management Science, in: Contract Analysis and Design for Supply Chains with Stochastic Demand, edition 1, chapter 0, pages 115-129, Springer.
    • Handle: RePEc:spr:isochp:978-1-4899-7633-8_5
    DOI: 10.1007/978-1-4899-7633-8_5
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    Cited by:

    1. Yan Shi & Fulin Wang & Ying Wang & Lili Jia, 2023. "The Maize Supply Chain Coordination Mechanism under Yield Uncertainty Caused by Drought: A Study in the Heilongjiang Province of China," Sustainability, MDPI, vol. 15(14), pages 1-17, July.
    2. Tian, Xiaoge & Chen, Weiming & Hu, Jinglu, 2023. "Game-theoretic modeling of power supply chain coordination under demand variation in China: A case study of Guangdong Province," Energy, Elsevier, vol. 262(PA).

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