A review of non-cooperative newsvendor games with horizontal inventory interactions

There are numerous applications of game theory in the analysis of supply chains where multiple actors interact with each other in order to reach their own objectives. In this paper we review the use of non-cooperative game theory in inventory management within the newsvendor framework describing a single period inventory control model with the focus on horizontal interactions among multiple independent newsvendors. We develop a framework for identifying these types of horizontal interactions including, for example, the models with the possibility of inventory sharing via transshipments, and situations with substitutable products sold by multiple newsvendors. Based on this framework, we discuss and relate the results of prior research and identify future research opportunities

オムニチャネル小売業におけるファッション商品の品切れに対する対応のモデル化分析

筑波大学 (University of Tsukuba)201

Optimal Decisions of a Supply Chain with Two Risk-Averse and Competing Retailers under Random Demand

This paper investigates the optimal decisions in a decentralized supply chain consisting of one manufacturer and two competing retailers who face price-sensitive and stochastic demand. The retailers are risk averse with conditional value at risk (CVaR) as their risk measure, and the manufacturer is a risk-neutral agent. We construct manufacturer-Stackelberg games with retailers, who engage in horizontal price competition. For the multiplicative demand model and expected demand as an exponential function of both prices, we show that there exists the optimal pricing-ordering joint decision uniquely. We then explore the influence of the price sensitivity, risk aversion, and retail competition on optimal decisions and channel efficiency. The results show that retail competition contributes to manufacturer and improves channel efficiency of the decentralized supply chain. When the retailers are more risk averse, the channel efficiency becomes much lower. However, the level of retailers’ risk aversion has no significant impact on the manufacturer’s optimal wholesale price and retailer’s optimal selling price

The Newsvendor Problem: Review and Directions for Future Research

In this paper, we review the contributions to date for analyzing the newsvendor problem. Our focus is on examining the specific extensions for analyzing this problem in the context of modeling customer demand, supplier costs, and the buyer risk profile. More specifically, we analyze the impact of market price, marketing effort, and stocking quantity on customer demand; how supplier prices can serve as a coordination mechanism in a supply chain setting; integrating alternative supplier pricing policies within the newsvendor framework; and how the buyer’s risk profile moderates the newsvendor order quantity decision. For each of these areas,we summarize the current literature and develop extensions. Finally, we also propose directions for future research

Supply chain contracting with competing regretful retailers

We study a two-tier supply chain with demand uncertainty where retailers experience regret from ex-post inventory error. With a monopolist retailer, we find that individual rationality can lead to supply chain coordination and creates non-trivial differences between regret and other reference points previously shown to be mathematically equivalent. Under competition, inventory regret can lead to either a separating or a pooling equilibrium despite the heterogeneity in their disutility from regret. The potential for a separating or pooling equilibria also differs substantially from the extant literature with implications for the wholesale price contracts and how competition dynamics impact industry service levels

A Supply Chain Equilibrium Model with General Price-Dependent Demand

The concept of supply chain equilibrium has been widely employed to solve real-life cases. Under this concept, decisions makers move simultaneously and compete in a noncooperative manner to achieve a supply chain network equilibrium. This paper proposes a supply chain network equilibrium model consisting of multiple raw material suppliers, manufacturers and retailers. Unlike previous studies, we assume that the demand for the product at each retail outlet is modeled as general stochastic functions of price that encompass additive-multiplicative demand models used in previous studies. Under general price-dependent demand functions, we derive the optimality conditions of suppliers, manufacturers and retailers, and establish that the governing equilibrium conditions can be formulated as a finite-dimensional variational inequality problem. The existence and uniqueness of the solution to the variational inequality are examined. A sensitivity analysis and a series of numerical tests are conducted to illustrate the analytical effects of demand distribution, model parameters, demand level and variability on quantity shipments, prices, and expected profits. Managerial insights are reported to show the impact of different types of demand functions and model parameters on the equilibrium solutions

Supply chain collaboration

In the past, research in operations management focused on single-firm analysis. Its goal was to provide managers in practice with suitable tools to improve the performance of their firm by calculating optimal inventory quantities, among others. Nowadays, business decisions are dominated by the globalization of markets and increased competition among firms. Further, more and more products reach the customer through supply chains that are composed of independent firms. Following these trends, research in operations management has shifted its focus from single-firm analysis to multi-firm analysis, in particular to improving the efficiency and performance of supply chains under decentralized control. The main characteristics of such chains are that the firms in the chain are independent actors who try to optimize their individual objectives, and that the decisions taken by a firm do also affect the performance of the other parties in the supply chain. These interactions among firms’ decisions ask for alignment and coordination of actions. Therefore, game theory, the study of situations of cooperation or conflict among heterogenous actors, is very well suited to deal with these interactions. This has been recognized by researchers in the field, since there are an ever increasing number of papers that applies tools, methods and models from game theory to supply chain problems

The Impact of Demand Uncertainty on Consumer Subsidies for Green Technology Adoption

This paper studies government subsidies for green technology adoption while considering the manufacturing industry’s response. Government subsidies offered directly to consumers impact the supplier’s production and pricing decisions. Our analysis expands the current understanding of the price-setting newsvendor model, incorporating the external influence from the government, who is now an additional player in the system. We quantify how demand uncertainty impacts the various players (government, industry, and consumers) when designing policies. We further show that, for convex demand functions, an increase in demand uncertainty leads to higher production quantities and lower prices, resulting in lower profits for the supplier. With this in mind, one could expect consumer surplus to increase with uncertainty. In fact, we show that this is not always the case and that the uncertainty impact on consumer surplus depends on the trade-off between lower prices and the possibility of underserving customers with high valuations. We also show that when policy makers such as governments ignore demand uncertainty when designing consumer subsidies, they can significantly miss the desired adoption target level. From a coordination perspective, we demonstrate that the decentralized decisions are also optimal for a central planner managing jointly the supplier and the government. As a result, subsidies provide a coordination mechanism

Supply Chain Coordination under Advance-purchase Discount Contract with Sales Effort and Transshipment

In today’s business environment, a competition is no longer about competing between firms, but between supply chains. Improving supply chain’s performance has become necessary for companies to survive. Supply chain coordination ensures a maximumperformance of a supply chain. This dissertation studies impacts of an advance-purchase contract and supply chain coordination in two different supply chains.We first consider the supply chain with the manufacturer and retailer who can exert sales effort to stipulate demand. We develop the contract that combines the advance-purchase contract and the target rebate contract to coordinate the retailer’s ordering and effort decisions. We analytically show that supply chain coordination is achievable, but profit splitting may not be fully flexible depending on market conditions.We second consider the supply chain with the manufacturer and two retailers who can transship products to satisfy unmet demand as a result of an inventory shortage. We establish a new mechanism that integrates the advance-purchase contract to coordinate the supply chain. The coordination mechanism follows in two steps: it first aligns the objective of the retailer group with the objective of the supply chain, and second aligns the individual objective of each individual retailer with the joint objective of the retailer group. We analytically show that supply chain coordination and arbitrary profit split is achievable.The coordinating contracts lead to Pareto improving situations. The numerical analyses show the performance improvement of the supply chain from the inclusion of the advance-purchase contract. We also conduct the sensitivity analyses to see the impacts of the contract terms on the retailers’ optimal decisions, and the impacts of market conditions on the contracts. The potential future research directions for both studies are also discussed.Industrial Engineering & Managemen

Revenue Management and Demand Fulfillment: Matching Applications, Models, and Software

Recent years have seen great successes of revenue management, notably in the airline, hotel, and car rental business. Currently, an increasing number of industries, including manufacturers and retailers, are exploring ways to adopt similar concepts. Software companies are taking an active role in promoting the broadening range of applications. Also technological advances, including smart shelves and radio frequency identification (RFID), are removing many of the barriers to extended revenue management. The rapid developments in Supply Chain Planning and Revenue Management software solutions, scientific models, and industry applications have created a complex picture, which appears not yet to be well understood. It is not evident which scientific models fit which industry applications and which aspects are still missing. The relation between available software solutions and applications as well as scientific models appears equally unclear. The goal of this paper is to help overcome this confusion. To this end, we structure and review three dimensions, namely applications, models, and software. Subsequently, we relate these dimensions to each other and highlight commonalities and discrepancies. This comparison also provides a basis for identifying future research needs.Manufacturing;Revenue Management;Software;Advanced Planning Systems;Demand Fulfillment