Supply chain coordination via capacity options with uncertain demand and supply

This paper develops a capacity options model in the two-echelon supply chain with the emergent procurement from the spot market. In our model, we will deal with not only demand uncertainty but also supply uncertainty. At r st, we nd the equilibrium of the Stackelberg Game and then investigate the effect of uncertainties in the demand and supply on the optimal decision behaviors. We also discuss the value of the options contract and the option e xibility for the manufacturer the supplier and the supply chain respectively. Then, we study the channel coordination by incorporating the pro t sharing rules and nd the set of Pareto sharing rules, and we analyze the Nash Bargaining Game over the Pareto Sharing rules and nd the optimal sharing rule.