Journal
TRANSPORTATION RESEARCH PART E-LOGISTICS AND TRANSPORTATION REVIEW
Volume 123, Issue -, Pages 45-60Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.tre.2019.01.010
Keywords
Options contract; Coordination; Supply chain management; Nash equilibrium; Pricing; Competition
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In this paper we demonstrate that options contract coordinates single supplier - multiple buyer supply chain network and can eliminate channel conflict stemming from simultaneous price and inventory competition. We show that a pure strategy unique Nash equilibrium exists for buyers' game and the supplier is able to coordinate the entire supply chain. Our analysis further indicates that options contract provides the supplier with better flexibility in terms of profit allocation compared to buyback contract. We identify a key limitation of this contract: it can coordinate a supply chain only with a limited number of buyers.
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