Abstract
This paper considers optimal contracts in supply chains that consist of n≥ 2 firms and face a potential investment hold‐up problem. We show that option contracts may solve the incentive problems. First, we provide case‐study evidence for the use of option contracts in the semiconductor industry. As our second contribution, we generalize the earlier option contract approach by introducing continuous quantities. Third, we extend the setting to n parties. For long supply chains, the first‐best allocation can be achieved if there is a particular order of renegotiations.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
