Incentive compatible mechanisms for decentralised Supply Chain Formation

Y. Narahari, N. Hemachandra, Nikesh Kumar Srivastava, Devadatta M. Kulkarni and Jeffrey D. Tew

International Journal of Operational Research, 2009, vol. 6, issue 1, 27-53

Abstract: In this paper, we consider a decentralised supply chain formation problem for multi-echelon supply chains when the managers of the individual echelons are rational and intelligent. At each echelon, there is a choice of service providers and the specific problem we solve is that of determining a cost-optimal mix of service providers so as to achieve a desired level of end-to-end delivery performance. In this paper, we develop a mechanism design framework for addressing this problem and propose two incentive compatible mechanisms: Supply Chain Formation – Dominant Strategy Incentive Compatibility (SCF-DSIC) and Supply Chain Formation – Bayesian Incentive Compatibility (SCF-BIC). We illustrate the efficacy of the proposed methodology using the example of a three echelon manufacturing supply chain.

Keywords: supply chain planning; Groves mechanisms; dAGVA mechanisms; d'Aspremont and Gerard-Varet; incentive compatibility; decentralised supply chains; supply chain formation; supply chain management; SCM; multi-echelon supply chains. (search for similar items in EconPapers)
Date: 2009
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