Game-theoretic analyses of decentralized assembly supply chains : non-cooperative equilibria vs. coordination with cost-sharing contracts

Mingming LENG, Mahmut PARLAR

Research output: Journal PublicationsJournal Article (refereed)

81 Citations (Scopus)


This paper considers a multiple-supplier, single manufacturer assembly supply chain where the suppliers produce components of a short life-cycle product which is assembled by the manufacturer. In this single-period problem the suppliers determine their production quantities and the manufacturer chooses the retail price. We assume that the manufacturer faces a random price-dependent demand in either additive or multiplicative form. For each case, we analyze both simultaneous-move and leader-follower games to respectively determine the Nash and Stackelberg equilibria, and find the globally-optimal solution that maximizes the system-wide expected profit. Then, we introduce appropriate buy-back and lost-sales cost-sharing contracts to coordinate this assembly supply chain, so that when all the suppliers and the manufacturer adopt their equilibrium solutions, the system-wide expected profit is maximized.
Original languageEnglish
Pages (from-to)96-104
Number of pages9
JournalEuropean Journal of Operational Research
Issue number1
Publication statusPublished - 1 Jul 2010



  • Assembly supply chain
  • Buy-back
  • Game theory
  • Lost-sales cost-sharing

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