The dynamic demand game: a Markov state fictitious play approach to a two-echelon supply chain problem under demand uncertainty

Diana G. Ramírez;, Julio Mario Daza-Escorcia, Javier Visbal Martinez, Carlos D. Paternina-Arboleda and Alfredo Garcia

International Journal of Industrial and Systems Engineering, 2012, vol. 10, issue 3, 319-335

Abstract: We approach a two-echelon supply chain optimisation problem, specifically, a retailer's replenishment problem, which faces stochastic demand. The retailer has to coordinate, beforehand, with his/her supplier on the amount purchased in order to satisfy their demanded quantity and, at the same time, minimise costs due to storage and penalty costs. To solve this problem, a Markov state game was designed and fictitious play, a learning methodology used in game theory, was applied and programmed in Borland C++ Builder 6.0 Enterprise Edition, where software known as 'UN Tech Supply Chain Optimiser' was generated and produced at a 95% confidence level, better results than those already found in literature for this same problem.

Keywords: two-echelon supply chains; Markov game; fictitious play; demand uncertainty; supply chain management; SCM; supply chain optimisation; retailer replenishment. (search for similar items in EconPapers)
Date: 2012
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