Title page for ETD etd-04092003-155049

Type of Document

Dissertation

Author

Dai, Yue ,

Author's Email Address

ydai2@eos.ncsu.edu

URN

etd-04092003-155049

Title

Game Theoretic Approach to Supply Chain Management

Degree

PhD

Graduate Program

Operations Research

Advisory Committee

Advisor Name	Title
Dr. Shu-Cherng Fang	Committee Chair
Dr. Henry L.W. Nuttle	Committee Co-Chair
Dr. Xiuli Chao	Committee Co-Chair
Dr. Russell E. King	Committee Member

Keywords

revenue management
supply chain management
game theory

Date of Defense

2003-03-24

Availability

unrestricted

Abstract

This dissertation studies the competitive behavior of firms in
supply chain management and revenue management contexts. A game
theoretic approach is employed. We analyze capacity allocation and
pricing strategies and derive equilibrium solutions for multiple
competing firms. We also study channel coordination mechanisms to
bring the competing firms together for chain-wide optimality and
conduct sensitivity analysis of equilibrium solutions.

First we consider a single-period distribution system with one
supplier and two retailers. When a stockout occurs at one retailer
the customer may go to the other retailer. The supplier may have
infinite or finite capacity. In the latter case, if the total
quantity ordered (claimed) by the retailers exceeds the supplier's
capacity, an allocation policy is invoked to assign the capacity
to the retailers. We show that a unique Nash equilibrium exists
when the supplier has infinite capacity. While, when the capacity
is finite, a Nash equilibrium exists only under certain
conditions. For the finite capacity case, we also use the concept
of Stackelberg game to develop optimal strategies for both the
leader and the follower. In addition to the decentralized
inventory control problem, we study the centralized inventory
control problem and obtain the optimal allocation that maximizes
the expected profit of the entire supply chain. We also design
perfect coordination mechanisms, i.e., a decentralized cost
structure resulting in a Nash equilibrium with chain-wide profits
equal to those achieved under a fully centralized system.

As an extension to the capacity allocation models above, we then
consider two firms where each firm has a local store and an online
store. Customers may shift among these stores upon encountering a
stockout. Each firm makes the capacity allocation decision to
maximize its profit. We consider two scenarios of a single-product
single-period model and derive corresponding existence and
stability conditions of a Nash equilibrium. We then conduct
sensitivity analysis of the equilibrium solution with respect to
price and cost parameters. Finally we extend the results to a
multi-period model in which each firm decides its total capacity
and allocates this capacity between its local and online stores. A
myopic solution is derived and shown to be a Nash equilibrium solution of
a corresponding sequential game.

Finally, we consider the pricing strategies of multiple firms
providing same service and competing for a common pool of
customers in a revenue management context. The demand at each firm
depends on the selling prices charged by all firms, each of which
satisfies demand up to a given capacity limit. We use game theory
to analyze the systems under both deterministic and general
stochastic demand. We derive the existence and uniqueness
conditions for a Nash equilibrium and calculate the explicit Nash
equilibrium point when the demand at each firm is a linear
function of price.

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