A Supply Chain Coordination Model Based on Refund Contract Option

The studies on contract option of supply chain are new research fields of supply chain coordination. Contract option can not only set relevant parameters to coordinate supply chain, but also can avoid the risk of supply chain to some extent. Employing refund contract option as a coordinating tool, this paper focuses on the elementary questions of two-echelon supply chain. In line with our model, we find that refund contract option will promote retailers to increase their order, coordinate the supply chain and improve the supply chain members' Pareto results of revenue. In light of above analysis, we have proved the validity of refund contract option to coordinate supply chain by simulating reality case.