Design On Quantity Discounts Contract With Options And Its Numerical Experiment

Being a dynamic alliance involving multiple independent corporations in which all node enterprises make decisions aimed at maximizing their own profits, supply chain can hardly achieve coordination under decentralized control. By designing an effective supply contract, the supply chain managers can avoid"Bull-whip Effect"and"Double Marginalization"effectively and finally can share revenue and risk between node enterprises.On the basis of previous studies, this paper made analysis on the effect of quantity discount contract, which can be used to incent retailer under decentralized control to increase order quantity to the optimal order quantity under centralized control. Since risk sharing between partners can not be realized in quantity discount contracts, this paper set up a quantity discount contract model with options, which gives the optimal order strategy for retailers, and makes recommendations on how to determine the discount point for suppliers. The result is pointed out that on one hand the model can contribute to the reduction of the order risk for retailers, on the other hand, since the discount point and the discount price will not affect the total quantity of retailers, when the discount price falls, the actual order will increase and the option order will decrease, the supplier can control its risk effectively.Finally, the application of options was proved to be able to increase the revenue of supplier, retailer and the supply chain by numerical experiment. Further, the quantity discount contract with options was compared with traditional quantity discount contract at revenue, risk and supply chain coordination, the result is that the quantity discount contract with options may contribute to revenue increase, risk reduction and supply chain coordination.