On the Coordination of Supply Chain with Demand Uncertainty Under the Combination of the Wholesale Price Contract and Option Contract

Abstract

In this paper, we studied the coordination of the supply chain consisting of one retailer and one supplier, where the market demand is uncertain. The combination of the Wholesale Price Contract and Option Contract is used to solve the problem that market risk is borne independently by the supplier. The theoretical analysis shows that the strategy can share the risk between members of the supply chain, i.e., the supplier's risk reduced, and the supply chain system profit can be rationally distributed, the supply chain can be coordinated and a win-win situation can be achieved by choosing appropriate option price. Finally, the numerical examples were given to verify this conclusion.