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)peer-review

124 Citations (Scopus)

Abstract

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
Volume204
Issue number1
DOIs
Publication statusPublished - 1 Jul 2010

Funding

Research supported by the Research and Postgraduate Studies Committee of Lingnan University under Research Project No. DR07B8.Research supported by the Natural Sciences and Engineering Research Council of Canada.

Keywords

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

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