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Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family

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Author Info
Yu, Yugang
Huang, G.Q. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
Abstract

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications.

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File URL: http://hdl.handle.net/1765/15029
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Publisher Info
Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2009-009-LIS Revision_Date: 2009-03-10.

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Date of creation: 02 Mar 2009
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Handle: RePEc:dgr:eureri:1765015029

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Related research
Keywords: supply chain management; nash game model; vendor managed inventory;

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This page was last updated on 2009-12-16.

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