Capability coordination in logistics service supply chain with options contract under Stackelberg game model

Logistics service supply chain is different from finished goods inventory supply chain, in which supplier-buyer coordination is approached only through logistics capability adjustment and optimization. In this paper, a coordination mechanism through options contract on logistics capability under Stackelberg game model is developed to increase the partiespsila expected profit. Results show that the negative linear relationship exists between option price and option execute price, and the value of option price must be located in a certain scope as the core element of contract parameters under channel coordination. The effectiveness of coordination mechanism and the proposed mechanism for the allocation of surplus system expected profit is verified through a numerical study.