Optimal order policies for supply chain with options contracts

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)Not applicablepeer-review

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Detail(s)

Original languageEnglish
Title of host publication2005 International Conference on Services Systems and Services Management, Proceedings of ICSSSM'05
Pages680-683
Volume1
StatePublished - 2005

Publication series

Name
Volume1

Conference

Title2005 International Conference on Services Systems and Services Management, ICSSSM'05
PlaceChina
CityChongquing
Period13 - 15 June 2005

Abstract

We consider two independent retailers that face stochastic demand. Because of long lead-time and short selling season, retailers obtain goods from a supplier via options contract. At the beginning of the selling season, retailer can adjust their positions by trading options with another when the demand is realized. We focus on deriving how the possibility of such options trading between two independent retailers affects each retailer's optimal order and optimal profit. Game theory is adopted as an analysis tool. We show that there exists a unique Nash equilibrium in pure strategy for retailers' optimal orders with options trading. The retailer's optimal profit with options trading is higher than the case without options trading. The retailers' optimal orders with options trading all increase in options trading price. There exists a unique optimal options price that yields the retailers' joint optimal profit © 2005 IEEE.

Research Area(s)

  • Nash equilibrium, Options trading, Options trading price, Risk management, Supply chain management

Citation Format(s)

Optimal order policies for supply chain with options contracts. / Chen, Xu; Hao, Gang.

2005 International Conference on Services Systems and Services Management, Proceedings of ICSSSM'05. Vol. 1 2005. p. 680-683 1499560.

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)Not applicablepeer-review