Option contracts in managing a humanitarian relief supply chain: double vs. bidirectional

Abstract

Owing to the high unpredictability of disasters, relief supplies are usually pre-positioned in advance, thereby making relief supplies management very challenging. The introduction of option contracts can improve disaster relief efficiency and performance. Considering this motivation, this paper separately introduces double and bidirectional option contracts into the humanitarian relief supply chain. The value and choice of two option contracts are investigated not only from the economic perspective but also from the sustainable perspective. The results show that two option contracts can always benefit the buyer and the disaster victims, but cannot always benefit the supplier, compared to the wholesale price contract. If the wholesale price is relatively high (low) and the bidirectional option purchase price is relatively low (high), the buyer and the disaster victims prefer the bidirectional (double) option contract while the supplier prefers the double (bidirectional) option contract.

KEYWORDS:

• Humanitarian relief supply chain
• doubleoption contract
• bidirectional option contract

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

All data generated or analysed during this study are included in this published article.

Additional information

Funding

This work was supported by the Natural Science Foundation of Sichuan Province [grant number 2023NSFSC1017], the Cultivation Project of the National Social Science Foundation for Southwest University of Science and Technology [grant number 23sxb075], the National Natural Science Foundation of China [grant number 71802168] and Humanities and Social Science Fund of Ministry of Education of China [grant number 18YJC630165].