Abstract: Logistics service supply chain(LSSC) is different from finished goods inventory supply chain,in which supplier-buyer coordination is approached only through logistics capability adjustment and optimization for it is a capability chain.In this paper,a coordination mechanism through option contracts on logistics capability investment and reservation between logistics service integrator (LSI) and logistics service subcontractor (LSS) under Stackelberg game model is developed to increase the parties' expected profit.The effectiveness of coordination mechanism and the proposed mechanism for the allocation of surplus system expected profit is verified through a numerical study.Results show that option contracts designed can coordinate LSSC perfectly and increase the partied expected profit.Furthermore,the negative linear rela tionship exists between option price and option execute price,and the value of option price must be located in a certain scope as the core element of contract parameters under channel coordination.

Key words: logistics service supply chain, option contracts, channel coordination, capability reservation