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Optimal co-investment in supply chain infrastructure

  • Kogan, Konstantin
  • Tapiero, Charles S.
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    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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    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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    9. 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.
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    12. Wedad Elmaghraby & P{\i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    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.
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    15. Ernst R. Berndt & Bengt Hansson, 1991. "Measuring the Contribution of Public Infrastructure Capital in Sweden," NBER Working Papers 3842, National Bureau of Economic Research, Inc.
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