A game theoretic approach to coordination of pricing, advertising, and inventory decisions in a competitive supply chain

Ali Naimi Sadigh; S. Kamal Chaharsooghi; Majid Sheikhmohammady

doi:10.3934/jimo.2016.12.337

Article Contents

2016, Volume 12, Issue 1: 337-355. Doi: 10.3934/jimo.2016.12.337

This issue Previous Article An alternating direction method for solving a class of inverse semi-definite quadratic programming problems Next Article Fuzzy quadratic surface support vector machine based on fisher discriminant analysis

A game theoretic approach to coordination of pricing, advertising, and inventory decisions in a competitive supply chain

1.
Department of Industrial Engineering, Faculty of Engineering, Tarbiat Modares University, Tehran

Received: September 2014

Revised: March 2015

Published: January 2016

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Abstract

Supply chain members coordinate with each other in order to obtain more profit. The major mechanisms for coordination among supply chain echelons are pricing, inventory management, and ordering decisions. Regarding to these mechanisms, supply chain participants have conflicts of interest. This paper concerns coordination of enterprise decisions including pricing, advertising, ordering, and inventory decisions in a multi-echelon supply chain consisting of multiple suppliers, one manufacturer, and multiple retailers. In the current study, a novel inventory model is presented for both the manufacturer, and the retailers who are able to determine the number of orders for each product. Moreover, each supply chain member has equal power and make their decisions simultaneously. The proposed model considers the relationships among three echelon supply chain members based on a non-cooperative Nash game with pricing and inventory decisions. An iterative solution algorithm is proposed to find Nash equilibrium point of the game. Several numerical examples are presented to study the application of the model as well as the effectiveness of the algorithm. Finally, a comprehensive sensitivity analysis is performed and some important managerial insights are highlighted.

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Mathematics Subject Classification: Primary: 91A10, 90B60, 90B05.

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