The survey on supply chain coordination with contracts
ICEC '05 Proceedings of the 7th international conference on Electronic commerce
Multi-period dynamic supply contracts with cancellation
Computers and Operations Research - Articles presented at the conference on routing and location (CORAL)
Supply chain information sharing in a macro prediction market
Decision Support Systems
Competitive Options, Supply Contracting, and Electronic Markets
Management Science
Empirical testing of forecast update procedure for seasonal products
International Journal of Information Technology and Management
Modeling supplier selection and the use of option contracts for global supply chain design
Computers and Operations Research
Competition in the Supply Option Market
Operations Research
A portfolio approach to multi-product newsboy problem with budget constraint
Computers and Industrial Engineering
Computers and Industrial Engineering
Coordinating a two-supplier and one-retailer supply chain with forecast updating
Automatica (Journal of IFAC)
Sourcing Flexibility, Spot Trading, and Procurement Contract Structure
Operations Research
Flexible supply policy with options and capacity constraints
Operations Research Letters
An evaluation of an option contract in semiconductor supply chains
Proceedings of the Winter Simulation Conference
Modeling supply contracts in semiconductor supply chains
Proceedings of the Winter Simulation Conference
Impact of the shape of demand distribution in decision models for operations management
Computers in Industry
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We investigate the role of options (contingent claims) in a buyer-supplier system. Specifically using a two-period model with correlated demand, we illustrate how options provide flexibility to a buyer to respond to market changes in the second period. We also study the implications of such arrangements between a buyer and a supplier for coordination of the channel. We show that, in general, channel coordination can be achieved only if we allow the exercise price to be piecewise linear. We develop sufficient conditions on the cost parameters such that linear prices coordinate the channel. We derive the appropriate prices for channel coordination which, however, violate the individual rationality constraint for the supplier. Contrary to popular belief (based on simpler models) we show that credit for returns offered by the supplier does not always coordinate the channel and alleviate the individual rationality constraint. Credit for returns are useful only on a subset of the feasibility region under which channel coordination is achievable with linear prices. Finally, we demonstrate (numerically) the benefits of options in improving channel performance and evaluate the magnitude of loss due to lack of coordination.