Game Theory for Security Investments in Cyber and Supply Chain Networks

In a constantly and intricately connected world that is going digital, cybersecurity is imperative to not just the success but also the survival of a business. The ubiquitous digital transformation is fueled by a convulsive growth of devices and data that are leading important innovations in the domain of cyber-physical systems. However, this growth has also enabled internal and external threats to skyrocket, depicting the inherent dichotomy. With an evolving threat landscape, a perpetrator has to be successful once, while the defenders have to continually succeed in fending-off attacks to protect critical infrastructure and digital assets. Businesses are facing a barrage of attacks, majority of which have a financial or an espionage motive. Against the hackers, businesses put forth an asymmetric and myopic struggle.Through this dissertation, I contribute to the modeling and analysis of security investments in cyber and supply chain networks considering network vulnerability also nonlinear budget constraints. The latter contributes significantly to the literature on variational inequality, game theory, and cybersecurity by being methodologically relevant to the application and solution of such problems. I also explore cooperation in terms of cybersecurity among firms in a network, providing a quantitative basis to information sharing to explore its financial and policy related benefits. This work extends the current literature in the cooperative game theory and cybersecurity domains

Essays on Supply Chain Economic Networks for Disaster Management Inspired by the COVID-19 Pandemic

The COVID-19 pandemic, which was declared by the World Health Organization on March 11, 2020, negatively impacted virtually all economic and social activities across the globe. As of March 7, 2022, more than 6 million deaths have been associated with COVID-19 disease. This health disaster, unlike many other disasters, is not limited to time or location. It has resulted in intense global competition for many essential products, from Personal Protective Equipment (PPE) to ventilators and vaccines and food products. In this dissertation, I construct, analyze, and quantitatively solve a spectrum of supply chain economic network models inspired by realities in the COVID-19 pandemic in four essays. In this dissertation, I first develop a game theory network model for integrating financial and logistical challenges that humanitarian organizations involved in disaster management are faced with. This part of the dissertation illustrates how game theory can be utilized in the modeling and analysis of the behavior of multiple decision-makers that interact with each other in disaster supply chain economic networks under different constraints. I, subsequently, construct the first Generalized Nash Equilibrium (GNE) model with stochastic demands to model competition among organizations at demand points for medical supplies inspired by the COVID-19 pandemic. The theoretical constructs are provided, and a Variational Equilibrium is utilized to enable alternative variational inequality formulations. Then, I delve more deeply into an important characteristic of disasters, that of uncertainty, by developing a two-stage stochastic game theory network model. Specifically, the first multistage stochastic GNE model is constructed for the study of competition among multiple countries for limited supplies of medical items in the disaster preparedness and response phases in the COVID-19 pandemic. Illustrative examples and algorithmically solved numerical examples, inspired by the need for N95 masks and ventilators, are presented. Finally, I turn to a key aspect of pandemic disaster management, which is the evaluation of trade instruments that governments have been applying during the pandemic to protect their citizens. Specifically, a unified variational inequality framework in the context of spatial price network equilibrium problems is constructed that focuses on a plethora of essential products, that are in high demand in the pandemic, but short in supply globally. The model allows one to seamlessly introduce various trade measures, including tariffs, quotas, as well as price floors and ceilings

Competitive Multi-period Pricing with Fixed Inventories

This paper studies the problem of multi-period pricing for perishable products in a competitive (oligopolistic) market. We study non cooperative Nash equilibrium policies for sellers. At the beginning of the time horizon, the total inventories are given and additional production is not an available option. The analysis for periodic production-review models, where production decisions can be made at the end of each period at some production cost after incurring holding or backorder costs, does not extend to this model. Using results from game theory and variational inequalities we study the existence and uniqueness of equilibrium policies. We also study convergence results for an algorithm that computes the equilibrium policies. The model in this paper can be used in a number of application areas including the airline, service and retail industries. We illustrate our results through some numerical examples.Singapore-MIT Alliance (SMA

Stochastic equilibrium models for generation capacity expansion

Capacity expansion models in the power sector were among the first applications of operations research to the industry. The models lost some of their appeal at the inception of restructuring even though they still offer a lot of possibilities and are in many respect irreplaceable provided they are adapted to the new environment. We introduce stochastic equilibrium versions of these models that we believe provide a relevant context for looking at the current very risky market where the power industry invests and operates. We then take up different questions raised by the new environment. Some are due to developments of the industry like demand side management: an optimization framework has difficulties accommodating them but the more general equilibrium paradigm offers additional possibilities. We then look at the insertion of risk related investment practices that developed with the new environment and may not be easy to accommodate in an optimization context. Specifically we consider the use of plant specific discount rates that we derive by including stochastic discount rates in the equilibrium model. Linear discount factors only price systematic risk. We therefore complete the discussion by inserting different risk functions (for different agents) in order to account for additional unpriced idiosyncratic risk in investments. These different models can be cast in a single mathematical representation but they do not have the same mathematical properties. We illustrate the impact of these phenomena on a small but realistic example.capacity adequacy, risk functions, stochastic equilibrium models, stochastic discount factors

A bi-level programming approach for the shipper-carrier network problem

The Stackelberg game betweenshippers and carriers in an intermodal network is formulated as a bi-levelprogram. In this network, shippers make production, consumption, androuting decisions while carriers make pricing and routing decisions.The oligopolistic carrier pricing and routing problem, which comprisesthe upper level of the bi-level program, is formulated either as a nonlinearconstrained optimization problem or as a variational inequality problem,depending on whether the oligopolistic carriers choose to collude orcompete with each other in their pricing decision. The shippers\u27 decisionbehavior is defined by the spatial price equilibrium principle. Forthe spatial price equilibrium problem, which is the lower level of thebi-level program, a variational inequality formulation is used to accountfor the asymmetric interactions between flows of different commoditytypes. A sensitivity analysis-based heuristic algorithm is proposedto solve the program. An example application of the bi-level programmingapproach analyzes the behavior of two marine terminal operators. Theterminal operators are considered to be under the same Port Authority.The bi-level programming approach is then used to evaluate the PortAuthority\u27s alternative investment strategies

Supply chain network capacity competition with outsourcing: a variational equilibrium framework

This paper develops a supply chain network game theory framework with multiple manufacturers/producers, with multiple manufacturing plants, who own distribution centers and distribute their products, which are distinguished by brands, to demand markets, while maximizing profits and competing noncooperatively. The manufacturers also may avail themselves of external distribution centers for storing their products and freight service provision. The manufacturers have capacities associated with their supply chain network links and the external distribution centers also have capacitated storage and distribution capacities for their links, which are shared among the manufacturers and competed for. We utilize a special case of the Generalized Nash Equilibrium problem, known as a variational equilibrium, in order to formulate and solve the problem. A case study on apple farmers in Massachusetts is provided with various scenarios, including a supply chain disruption, to illustrate the modeling and methodological framework as well as the potential benefits of outsourcing in this sector

How to increase the impact of disaster relief: A study of transportation rates, framework agreements and product distribution

Due to restricted budgets of relief organizations, costs of hiring transportation service providers steer distribution decisions and limit the impact of disaster relief. To improve the success of future humanitarian operations, it is of paramount importance to understand this relationship in detail and to identify mitigation actions, always considering the interdependencies between multiple independent actors in humanitarian logistics. In this paper, we develop a game-theoretic model in order to investigate the influence of transportation costs on distribution decisions in long-term relief operations and to evaluate measures for improving the fulfillment of beneficiary needs. The equilibrium of the model is a Generalized Nash Equilibrium, which has had few applications in the supply chain context to date. We formulate it, utilizing the construct of a Variational Equilibrium, as a Variational Inequality and perform numerical simulations in order to study the effects of three interventions: an increase in carrier competition, a reduction of transportation costs and an extension of framework agreements. The results yield important implications for policy makers and humanitarian organizations (HOs). Increasing the number of preselected carriers strengthens the bargaining power of HOs and improves impact up to a certain limit. The limit is reached when carriers set framework rates equal to transportation unit costs. Reductions of transportation costs have a consistently positive, but decreasing marginal benefit without any upper bound. They provide the highest benefit when the bargaining power of HOs is weak. On the contrary, extending framework agreements enables most improvements when the bargaining power of HOs is strong

Network Game Theory Models of Services and Quality Competition with Applications to Future Internet Architectures and Supply Chains

The Internet has transformed the way in which we conduct business and perform economic and financial transactions. One key challenge of the Internet is the inefficiency of the mechanisms by which technology is deployed and the business and economic models surrounding these processes (Wolf et al. (2014)). Equilibrium models for the Internet generally assume basic economic relationships. However, in new paradigms for the Internet and in supply chain networks, price is not the only factor; quality of service (QoS) is also of increasing importance. Supply chains networks, which give us the means to manufacture products and deliver them to points of demand across the globe, are also under many pressures to offer differentiated products and services (Nagurney (2014)). It is well-known today that success is determined by how well the entire supply chain performs, rather than the performance of its individual entities. This dissertation contributes to the analysis, design, and management of the future Internet and supply chain networks with a focus on price and quality competition in service-oriented networks. Specifically, I focus on economic models for the Internet of the future by developing both a basic and a general network economic game theory model of a quality-based service-oriented Internet to study competition among service providers. To study and analyze the underlying dynamics of the various economic decision-makers, subsequently, I develop a dynamic network economic model of a service-oriented Internet with price and quality competition using projected dynamical systems theory. Then, to assess the prices for various contract durations at the demand markets, I consider a game theory model of a service-oriented Internet in which the network providers compete in usage service rates, quality levels, and duration-based contracts. Finally, I construct a model that captures the competition among manufacturers and freight service providers in a supply chain network. This model is the first one in the literature that handles both price and quality competition with multiple modes of shipment from both equilibrium and dynamic perspectives. For each model, I derive the governing equilibrium conditions and provide the equivalent variational inequality formulations. In order to illustrate the modeling framework and the algorithm, I present computed solutions to several numerical examples for each model as well as sensitivity analysis results. This dissertation is heavily based on the following papers: Saberi, Nagurney, and Wolf (2014), Nagurney et al. (2014a), Nagurney et al. (2015b), and Nagurney et al. (2015a) as well as additional results and conclusions