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Purpose A lack of visibility into the manufacturer’s production cost information impedes a retailer’s ability to maximize her own profits, especially when market demand is uncertain. The purpose of this paper is to investigate the use of an option contract within a one-period two-echelon supply chain in the presence of asymmetric cost information. Design/methodology/approach Based on the principal-agent model, the retailer, acting as a Stackelberg leader, offers a menu of option contracts to mitigate the risk of uncertain demand and reveal asymmetric production cost information. The optimal contract in asymmetric and symmetric information scenarios is derived. Finally, the impact of production costs on the optimal contracts and the actors’ profits is explored by numerical experiments. Findings By comparing the optimal equilibrium solutions in two scenarios, the authors show that asymmetric cost information has a large impact on the optimal option contract and profits. In addition, information rent is affected by the type differential. The results prove that the level of information asymmetry plays a vital role in option contracts and profits. Originality/value Different from the existing literature on private demand information, this paper considers a supply chain with asymmetric cost information in the context of option contracts. Interestingly, not only the production cost but also the probability of a low production cost can affect the option strike price. In addition, from the perspective of the manufacturer, a high cost does not always bring a high information rent. These findings can provide some guidance to decision-makers.

This paper investigates pricing decisions with different time sequences in a cross‐border dual‐channel supply chain, in which the manufacturer produces products in country A and sells them to country B via a retail channel and an online channel. Meanwhile, we design three scenarios, the manufacturer‐led earlier scenario, the manufacturer‐led later scenario, and the retailer‐led scenario, to analyze the effects of time sequences when the manufacturer is risk neutral or risk averse. Through modeling and analysis, it is concluded that whether the manufacturer is risk averse or not, the manufacturer prefers the manufacturer‐led earlier scenario and the retailer's preference is the retailer‐led scenario. That is, when considering the time sequences, the players are encouraged to make all decisions in the first stage. Moreover, this paper analyzes the effects of the exchange rate and delivery lead time on the players’ pricing decisions. The theoretical and numerical analyses also show that the effects of an increasing exchange rate on the profits of the manufacturer and retailer are associated with the cost of the online channel. Additionally, while reducing the delivery lead time can attract customers, a moderate delivery lead time is more advantageous for the manufacturer. Finally, we further verify the robustness of the impacts of time sequences when the manufacturer is risk averse. Interestingly, if the cost of the online channel is higher, then the risk‐averse behavior benefits the retailer.