Competition under capacitated dynamic lot-sizing with capacity acquisition

Hongyan Li and Joern Meissner

International Journal of Production Economics, 2011, vol. 131, issue 2, 535-544

Abstract: Lot-sizing and capacity planning are important supply chain decisions, and competition and cooperation affect the performance of these decisions. In this paper, we look into the dynamic lot-sizing and resource competition problem of an industry consisting of multiple firms. A capacity competition model combining the complexity of time-varying demand with cost functions and economies of scale arising from dynamic lot-sizing costs is developed. Each firm can replenish inventory at the beginning of each period in a finite planning horizon. Fixed as well as variable production costs incur for each production setup, along with inventory carrying costs. The individual production lots of each firm are limited by a constant capacity restriction, which is purchased up front for the planning horizon. The capacity can be purchased from a spot market, and the capacity acquisition cost fluctuates with the total capacity demand of all the competing firms. We solve the competition model and establish the existence of a capacity equilibrium over the firms and the associated optimal dynamic lot-sizing plan for each firm under mild conditions.

Keywords: Game; theory; Capacity; optimization; Competition; Lot-sizing; Approximation; Equilibrium (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Competition under Dynamic Lot Sizing Costs with Capacity Acquisition (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:131:y:2011:i:2:p:535-544

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