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Supply option contracts with spot market and demand information updating
Zhao, Yingxue1; Choi, Tsan-Ming2; Cheng, T. C. E.3; Wang, Shouyang4
2018-05-01
Source PublicationEUROPEAN JOURNAL OF OPERATIONAL RESEARCH
ISSN0377-2217
Volume266Issue:3Pages:1062-1071
AbstractMotivated by the industrial practices, this paper develops a two-stage model to explore the supply option contract in a two-echelon supply chain, taking into account a stochastic spot market and demand information updating of general correlation. We develop a concept called EUOS (expected unit opportunity saving) by which to examine the expected benefit received per unit of the option under different market scenarios. With the concept of EUOS, we develop intuitive analytical results to characterize the optimal strategies for portfolio procurement via the option contract and spot markets, and to design the appropriate option mechanism for supply chain coordination. Furthermore, we reveal that EUOS can be a viable alternative for real option pricing in the supply chain. Detailed comparisons between the mixed market scenario (in which the spot market and the option contract market co-exist) and the scenario with pure spot market or pure option contract market are made, and thereby we analytically examine the effects of supply competition between the spot market and the option contract market. Our paper contributes to the literature by developing intuitive characterizations for the option contract models and generating some new insights with respect to the use of supply option contracts in the supply chain in the presence of a stochastic spot market and demand information updating. (C) 2017 Elsevier B.V. All rights reserved.
KeywordSupply chain management Supply chain contract Option contract Spot market Demand information updating
DOI10.1016/j.ejor.2017.11.001
Language英语
Funding ProjectNational Natural Science Foundation of China[71371052] ; Hong Kong Polytechnic University (G-YBGR)
WOS Research AreaBusiness & Economics ; Operations Research & Management Science
WOS SubjectManagement ; Operations Research & Management Science
WOS IDWOS:000423636700020
PublisherELSEVIER SCIENCE BV
Citation statistics
Document Type期刊论文
Identifierhttp://ir.amss.ac.cn/handle/2S8OKBNM/29431
Collection系统科学研究所
Affiliation1.Univ Int Business & Econ, Sch Int Trade & Econ, Beijing 100029, Peoples R China
2.Hong Kong Polytech Univ, Inst Text & Clothing, Kowloon, Hong Kong, Peoples R China
3.Hong Kong Polytech Univ, Dept Logist & Maritime Studies, Kowloon, Hong Kong, Peoples R China
4.Chinese Acad Sci, Acad Math & Syst Sci, Inst Syst Sci, Beijing 100190, Peoples R China
Recommended Citation
GB/T 7714
Zhao, Yingxue,Choi, Tsan-Ming,Cheng, T. C. E.,et al. Supply option contracts with spot market and demand information updating[J]. EUROPEAN JOURNAL OF OPERATIONAL RESEARCH,2018,266(3):1062-1071.
APA Zhao, Yingxue,Choi, Tsan-Ming,Cheng, T. C. E.,&Wang, Shouyang.(2018).Supply option contracts with spot market and demand information updating.EUROPEAN JOURNAL OF OPERATIONAL RESEARCH,266(3),1062-1071.
MLA Zhao, Yingxue,et al."Supply option contracts with spot market and demand information updating".EUROPEAN JOURNAL OF OPERATIONAL RESEARCH 266.3(2018):1062-1071.
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