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Optimal co-investment in supply chain infrastructure

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  • Kogan, Konstantin
  • Tapiero, Charles S.
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    Abstract

    This paper considers co-investment in a supply chain infrastructure using an inter-temporal model. We assume that firms' capital is essentially the supply chain's infrastructure. As a result, firms' policies consist in selecting an optimal level of employment as well as the level of co-investment in the supply chain infrastructure. Several applications and examples are presented and open-loop, as well as feedback solutions are found for non-cooperating firms, long- and short-run investment cooperation and non-simultaneous moves (Stackelberg) firms. In particular, we show that a solution based on Nash and Stackelberg differential games provides the same level of capital investment. Thus, selecting the leader and the follower in a co-investment program does not matter. We show that in general, co-investments by firms vary both over time and across firms, and thereby render difficult the implementation of co-investment programs for future capital development. To overcome this problem, we derive conditions for firms' investment share to remain unchanged over time and thus be easily planned.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 192 (2009)
    Issue (Month): 1 (January)
    Pages: 265-276

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    Handle: RePEc:eee:ejores:v:192:y:2009:i:1:p:265-276

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Supply chain management Gaming Investment analysis Control;

    References

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    1. Jan A. Van Mieghem, 1999. "Coordinating Investment, Production, and Subcontracting," Management Science, INFORMS, vol. 45(7), pages 954-971, July.
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    3. Lau, Amy Hing Ling & Lau, Hon-Shiang & Zhou, Yong-Wu, 2007. "A stochastic and asymmetric-information framework for a dominant-manufacturer supply chain," European Journal of Operational Research, Elsevier, vol. 176(1), pages 295-316, January.
    4. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
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    10. Stadtler, Hartmut, 2005. "Supply chain management and advanced planning--basics, overview and challenges," European Journal of Operational Research, Elsevier, vol. 163(3), pages 575-588, June.
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    12. Hammond, David & Beullens, Patrick, 2007. "Closed-loop supply chain network equilibrium under legislation," European Journal of Operational Research, Elsevier, vol. 183(2), pages 895-908, December.
    13. Morton I. Kamien & Lode Li, 1990. "Subcontracting, Coordination, Flexibility, and Production Smoothing in Aggregate Planning," Management Science, INFORMS, vol. 36(11), pages 1352-1363, November.
    14. Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
    15. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
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    Cited by:
    1. Li, Ying & Gupta, Sudheer, 2011. "Strategic capability investments and competition for supply contracts," European Journal of Operational Research, Elsevier, vol. 214(2), pages 273-283, October.

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