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

Mingming Leng and Mahmut Parlar

European Journal of Operational Research, 2010, vol. 204, issue 1, 96-104

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.

Keywords: Assembly; supply; chain; Game; theory; Buy-back; Lost-sales; cost-sharing (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:204:y:2010:i:1:p:96-104

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