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Incentive compatible mechanisms for decentralised Supply Chain Formation

Author

Listed:
  • Y. Narahari
  • N. Hemachandra
  • Nikesh Kumar Srivastava
  • Devadatta M. Kulkarni
  • Jeffrey D. Tew

Abstract

In this paper, we consider a decentralised supply chain formation problem for multi-echelon supply chains when the managers of the individual echelons are rational and intelligent. At each echelon, there is a choice of service providers and the specific problem we solve is that of determining a cost-optimal mix of service providers so as to achieve a desired level of end-to-end delivery performance. In this paper, we develop a mechanism design framework for addressing this problem and propose two incentive compatible mechanisms: Supply Chain Formation – Dominant Strategy Incentive Compatibility (SCF-DSIC) and Supply Chain Formation – Bayesian Incentive Compatibility (SCF-BIC). We illustrate the efficacy of the proposed methodology using the example of a three echelon manufacturing supply chain.

Suggested Citation

  • Y. Narahari & N. Hemachandra & Nikesh Kumar Srivastava & Devadatta M. Kulkarni & Jeffrey D. Tew, 2009. "Incentive compatible mechanisms for decentralised Supply Chain Formation," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 6(1), pages 27-53.
  • Handle: RePEc:ids:ijores:v:6:y:2009:i:1:p:27-53
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