A note generalizing “an option mechanism to coordinate a dyadic supply chain bilaterally in a multi-period setting”

Research output: Contribution to journalArticle

Abstract

The problem investigated in this paper is the one of finding the optimal combination of inventory and options in a stationary multi-period problem with an infinite horizon. The research complements existing literature as it considers the combination of option and wholesale contracts. The paper show how the problem can be transformed to a combination of newsvendor type problems. This alternative interpretation allows us to derive the necessary conditions for the pricing of an option contract that maximizes the system wide profit as well as the conditions for when the different parties will be able to design such a price scheme. It turns out that the possibility to do so depends on where it is optimal to keep inventory and how much inventory is kept under the pure wholesale contract. Moreover is it shown that the supply chain optimal solution cannot be guaranteed even if a Central planner prices the option contract.

Details

Authors
Organisations
External organisations
  • Linnaeus University
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Computational Mathematics
  • Transport Systems and Logistics

Keywords

  • Finance, Multi-period, Newsvendor, Options, Supply chain coordination
Original languageEnglish
Article number102257
JournalOmega (United Kingdom)
Publication statusE-pub ahead of print - 2020 May 15
Publication categoryResearch
Peer-reviewedYes