Channel coordination using options contract under simultaneous price and inventory competition

Indranil Biswas and Balram Avittathur

Transportation Research Part E: Logistics and Transportation Review, 2019, vol. 123, issue C, 45-60

Abstract: 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.

Keywords: Options contract; Coordination; Supply chain management; Nash equilibrium; Pricing; Competition (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (15)

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DOI: 10.1016/j.tre.2019.01.010

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