Dynamic Competitive Newsvendors with Service-Sensitive Demands

Research output: Journal PublicationsJournal Article (refereed)

27 Citations (Scopus)

Abstract

When two firms compete for service-sensitive demands based on their product availability, their actions will affect the future market share reallocation. This problem was first studied by Hall and Porteus (2000) using a dynamic game model. We extend their work by incorporating a general demand model, which enables us to obtain properties that reveal the dynamics of the game and the behavior of the players. In particular, we provide conditions under which the market share of a firm has a positive value and give it an upper bound. We further extend the game competition model to an infinite-horizon setting. We prove that there exists a stationary equilibrium policy and that the dynamic equilibrium policy always converges to a stationary equilibrium policy. We demonstrate that demand patterns will dictate how firms compete rationally and show the likely outcomes of the competition.
Original languageEnglish
Pages (from-to)84-93
Number of pages10
JournalManufacturing and Service Operations Management
Volume9
Issue number1
DOIs
Publication statusPublished - 1 Jan 2007
Externally publishedYes

Fingerprint

Newsvendor
Competitive dynamics
Stationary equilibria
Market share
Reallocation
Dynamic games
Dynamic equilibrium
Infinite horizon
Product availability
Demand model
Upper bound

Keywords

  • service-sensitive demand
  • availability competition
  • demand model
  • dynamic game
  • feedback Nash equilibrium
  • stationary policy
  • order quantity structure

Cite this

@article{7324c4cf6a7d49d49c81b1fccdc943b7,
title = "Dynamic Competitive Newsvendors with Service-Sensitive Demands",
abstract = "When two firms compete for service-sensitive demands based on their product availability, their actions will affect the future market share reallocation. This problem was first studied by Hall and Porteus (2000) using a dynamic game model. We extend their work by incorporating a general demand model, which enables us to obtain properties that reveal the dynamics of the game and the behavior of the players. In particular, we provide conditions under which the market share of a firm has a positive value and give it an upper bound. We further extend the game competition model to an infinite-horizon setting. We prove that there exists a stationary equilibrium policy and that the dynamic equilibrium policy always converges to a stationary equilibrium policy. We demonstrate that demand patterns will dictate how firms compete rationally and show the likely outcomes of the competition.",
keywords = "service-sensitive demand, availability competition, demand model, dynamic game, feedback Nash equilibrium, stationary policy, order quantity structure",
author = "Liming LIU and Weixin SHANG and Shaohua WU",
year = "2007",
month = "1",
day = "1",
doi = "10.1287/msom.1060.0123",
language = "English",
volume = "9",
pages = "84--93",
journal = "Manufacturing and Service Operations Management",
issn = "1523-4614",
publisher = "INFORMS Institute for Operations Research and the Management Sciences",
number = "1",

}

Dynamic Competitive Newsvendors with Service-Sensitive Demands. / LIU, Liming; SHANG, Weixin; WU, Shaohua.

In: Manufacturing and Service Operations Management, Vol. 9, No. 1, 01.01.2007, p. 84-93.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Dynamic Competitive Newsvendors with Service-Sensitive Demands

AU - LIU, Liming

AU - SHANG, Weixin

AU - WU, Shaohua

PY - 2007/1/1

Y1 - 2007/1/1

N2 - When two firms compete for service-sensitive demands based on their product availability, their actions will affect the future market share reallocation. This problem was first studied by Hall and Porteus (2000) using a dynamic game model. We extend their work by incorporating a general demand model, which enables us to obtain properties that reveal the dynamics of the game and the behavior of the players. In particular, we provide conditions under which the market share of a firm has a positive value and give it an upper bound. We further extend the game competition model to an infinite-horizon setting. We prove that there exists a stationary equilibrium policy and that the dynamic equilibrium policy always converges to a stationary equilibrium policy. We demonstrate that demand patterns will dictate how firms compete rationally and show the likely outcomes of the competition.

AB - When two firms compete for service-sensitive demands based on their product availability, their actions will affect the future market share reallocation. This problem was first studied by Hall and Porteus (2000) using a dynamic game model. We extend their work by incorporating a general demand model, which enables us to obtain properties that reveal the dynamics of the game and the behavior of the players. In particular, we provide conditions under which the market share of a firm has a positive value and give it an upper bound. We further extend the game competition model to an infinite-horizon setting. We prove that there exists a stationary equilibrium policy and that the dynamic equilibrium policy always converges to a stationary equilibrium policy. We demonstrate that demand patterns will dictate how firms compete rationally and show the likely outcomes of the competition.

KW - service-sensitive demand

KW - availability competition

KW - demand model

KW - dynamic game

KW - feedback Nash equilibrium

KW - stationary policy

KW - order quantity structure

UR - http://commons.ln.edu.hk/sw_master/4608

UR - https://www.scopus.com/inward/record.uri?eid=2-s2.0-33847320146&doi=10.1287%2fmsom.1060.0123&partnerID=40&md5=5e17197ac8e3c5084da81f1b45f5dbe2

U2 - 10.1287/msom.1060.0123

DO - 10.1287/msom.1060.0123

M3 - Journal Article (refereed)

VL - 9

SP - 84

EP - 93

JO - Manufacturing and Service Operations Management

JF - Manufacturing and Service Operations Management

SN - 1523-4614

IS - 1

ER -