Maximizing Retailer Profit under Supply Disruption an‎d Deman‎d Uncertainty Using an Option Contract with a Backup Supplier

5/25/2026 12:00:00 AM

In modern supply chains, retailers simultaneously face deman‎d uncertainty an‎d supply disruptions, which may lead to product shortages an‎d reduced profitability. Direct reliance on a backup supplier also imposes higher costs. This study focuses on maximizing the retailer’s profit in a two-echelon supply chain consisting of an unreliable primary supplier an‎d a reliable backup supplier, an‎d examines the role of a call option contract as a flexible coordination instrument. The strategic interaction between the retailer an‎d the backup supplier is modeled using a Stackelberg game framework. Three decision-making structures—centralized, decentralized, an‎d option-contract based are compared under both deterministic an‎d stochastic deman‎d conditions. Deman‎d uncertainty is modeled using a scenario-based approach grounded in real data from the electronics industry. Moreover, two contract design scenarios are analyzed: determining only the option price, an‎d simultaneously determining both the option price an‎d the exercise price. The results obtained from solving the model indicate that the call option contract, particularly under the scenario of simultaneous optimization of contract parameters, significantly increases the retailer’s expected profit compared to the decentralized model an‎d reduces the risk of shortages. This advantage becomes more pronounced under deman‎d uncertainty, bringing the system’s performance closer to that of the centralized model. Sensitivity analysis further confirms the robustness of the results. Findings from the case study suggest that call option contracts can enhance the retailer’s decision-making flexibility without requiring full supply chain coordination

تأمين‌كننده پشتيبان , قرارداد اختيار معامله , اختلال عرضه , عدم قطعيت تقاضا , نظريه بازي‌ها

Backup supplier , Option contract , Supply disruption , Demand uncertainty , Game theory

Hiva Bakhshande

Ahmad Makui