Abstract: In order to solve the problem of weak downstream orders for new products caused by uncertain demand in the consumer electronics industry, this paper designs a put option contract between a risk-neutral manufacturer and a risk-averse retailer, considering service level constraints. By comparison, this paper discusses whether the put option contract can motivate the risk-averse retailer to increase orders, and analyzes the effects of the retailer's risk aversion coefficient, service level constraints and put option contract parameters on retailer decisions and the profit of related members. Results show that an increase in the retailer's risk aversion level may inhibit the increase in the optimal initial order quantity, but has a positive impact on the manufacturer's expected profit. High service levels are beneficial to increasing the retailer's optimal initial order quantity and the manufacturer's expected profit, but not to increasing the retailer's maximum conditional risk value. The existence of put option contract is beneficial to all supply chain members.

Key words: service level constraint, put option contract, risk aversion, consumer electronics, new products