Option contracts for online celebrities as retailers in supply chains. Issue 14 (17th July 2020)

• Record Type: Journal Article
• Authors: Tang, Zijie; Wu, Desheng Dash; Dolgui, Alexandre
• Is Part Of: International journal of production research. Volume 58:Issue 14(2020)
• Page Start: 4215
• Page End: 4232
• Publication Date: 2020-07-17
• Subjects: online celebrity -- option contract -- capital constraints -- information asymmetry -- supply chain management; Factory management -- Periodicals; 658.57
• DOI: 10.1080/00207543.2019.1650977
• Languages: English
• ISSNs: 0020-7543

Abstract

Abstract : The online celebrity economy, also called the internet celebrity economy, is growing rapidly in China. Celebrity retailers are usually demand sensitive and capital constrained. The capital constraints along with information asymmetry often render supply chains inefficient when manufacturers are producing at non-optimal levels. Few studies have shed light on the online celebrity supply chain, especially with respect to options. In this study, we examine how option contracts can coordinate supply chains. We find that a capital-constrained retailer can achieve more profitable orders when given an option. The manufacturer – without the full information of market demand – also benefits from offering an option to the retailer. Our numerical case shows that the options contract generates different payoffs depending on the capital of the retailer.