Supply chain coordination with options contract for the three-level pull supply chain

A three-level pull supply chain composed by a manufacturer, a distributor and a retailer is considered to making use of the supply chain management coordination mechanism with options contract. Two models are proposed respectively. One is a supply management mechanism without applying options contract. The other is that with applying options contract. To the two models, corresponding analysis and calculation example are given. The conclusion is presented that the expected total profit with options is more than the other.