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Game-theoretic analyses of decentralized assembly supply chains : non-cooperative equilibria vs. coordination with cost-sharing contracts
European Journal of Operational Research
  • Mingming LENG, Lingnan University
  • Mahmut PARLAR, McMaster University, Canada
Document Type
Journal article
Publication Date
Elsevier BV
  • Assembly supply chain,
  • Game theory,
  • Buy-back,
  • Lost-sales cost-sharing

This paper considers a multiple-supplier, single manufacturer assembly supply chain where the suppliers produce components of a short life-cycle product which is assembled by the manufacturer. In this single-period problem the suppliers determine their production quantities and the manufacturer chooses the retail price. We assume that the manufacturer faces a random price-dependent demand in either additive or multiplicative form. For each case, we analyze both simultaneous-move and leader-follower games to respectively determine the Nash and Stackelberg equilibria, and find the globally-optimal solution that maximizes the system-wide expected profit. Then, we introduce appropriate buy-back and lost-sales cost-sharing contracts to coordinate this assembly supply chain, so that when all the suppliers and the manufacturer adopt their equilibrium solutions, the system-wide expected profit is maximized.

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Copyright © 2009 Elsevier B.V.

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Citation Information
Leng, M., & Parlar, M. (2010). Game-theoretic analyses of decentralized assembly supply chains: Non-cooperative equilibria vs. coordination with cost-sharing contracts. European Journal of Operational Research, 204(1), 96-104. doi: 10.1016/j.ejor.2009.10.011