Option Pricing and Capacity Allocation of China Railway Express Considering Capital Constraint and Spot Market

Abstract

This paper constructs a two-echelon logistics service supply chain composed of China Railway Express and an international freight forwarding agent. China Railway Express could provide financing services to the capital-constrained freight forwarding agent then the freight forwarding agent could order logistics and transportation services from Chin Railway Express simultaneously. There are two market channels to face the uncertain market demand, option contract and spot market. This paper establishes the Stackelberg Game model of both parties to solve the optimal option pricing decision of China Railway Express under two ordering channels, the optimal order quantity and the financing decisions of the freight forwarding agent. The research shows that equilibrium solutions exist in the game, and only under certain conditions, the option contract could coordinate the supply chain.