Risk analysis of commitment-option contracts with forecast updates

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)415-431
Journal / PublicationIIE Transactions (Institute of Industrial Engineers)
Volume43
Issue number6
Publication statusPublished - Jun 2011
Externally publishedYes

Abstract

The standard treatment of supply chain models largely focuses on the optimization of the expected value of a given cost or profit measure. Due to highly uncertain supply and demand conditions, the use of the expected objective measure may not be justified. This article studies a class of commitment-option supply contracts in a mean-variance framework. With structure properties established it is shown that a mean-variance trade-off analysis with advanced reservation can be carried out. Moreover, it is indicated how the corresponding contract decisions differ from decisions for optimizing an expected objective value. © 2011 "IIE".

Research Area(s)

  • commitment-option contract, forecast updates, Mean-variance, stochastic order