Abstract: A Stackelberg game model is developed for studying the market risk,caused by demand uncertainty and service competition in the two stage application service supply chain,which is composed of the Application Service Provider(ASP)and Independent Soft ware Vendor(ISV).The two different kinds of risk sharing mechanisms,ASP taking the risk or ISV taking the risk,are studied.The research result shows that,ASP will order the maximal amount of the allocated service demand when the ISV takes the risk.and a soft ware license sales plan is provided by ISV when the ASP takes the risk.At that time,ISV will incent ASP to order more soft ware license quantity by improving the soft ware quality and service level of upgrading the soft ware.Through the numerical analysis,the risk sharing mechanism of the ASP taking the risk is better than the mechanism of the ISV taking the risk from the perspective of the performance of application service supply chain.

Key words: application service supply chain, risk sharing, demand uncertainty, service competition, supply chain coordination