Existence of equilibria in a decentralized two-level supply chain
In this paper, we analyze equilibria in competitive environments under constraints across players' strategies. This means that the action taken by one player limits the possible choices of the other players. In this context, the usual approach to show existence of equilibrium, Kakutani's fixed point theorem, cannot be applied directly. In particular, best replies against a given strategy profile may not be feasible. We devise a new fixed point correspondence to deal with the feasibility issue. Our main motivation to study this problem of co-dependency comes from the field of supply chain planning. A set of buyers is faced with external demand over a planning horizon, and to satisfy this demand they request inputs from a set of suppliers. Both suppliers and buyers face production capacities and they plan their own production in a decentralized manner. A well-known coordination scheme for this setting is the upstream approach where the plan of the buyers is used to decide the request to the suppliers. We show the existence of equilibria for a (shared) inventory cost minimization version of this coordination scheme in which a distribution center manages the inventory of the inputs. However, we illustrate with an example that the centralized solution is not, in general, an equilibrium, suggesting that regulation may be needed.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:197:y:2009:i:2:p:642-658. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.