Coordination of Supply Chains with Bidirectional Option Contracts

  • Yingxue Zhao
  • Xiaoge Meng
  • Shouyang Wang
  • T. C. Edwin Cheng
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 234)


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.


Supply Chain Option Price Call Option Spot Market Option Contract 
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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Yingxue Zhao
    • 1
  • Xiaoge Meng
    • 2
  • Shouyang Wang
    • 3
  • T. C. Edwin Cheng
    • 4
  1. 1.School of International Trade and EconomicsUniversity of International Business and EconomicsBeijingChina
  2. 2.School of Economics and ManagementBeijing University of Aeronautics and AstronauticsBeijingChina
  3. 3.Chinese Academy of SciencesAcademy of Mathematics and Systems ScienceBeijingChina
  4. 4.Department of Logistics and Maritime StudiesThe Hong Kong Polytechnic UniversityHung HomHong Kong SAR

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