Game Theory in Supply Chain Analysis

Abstract

Game theory has become an essential tool in the analysis of supply chains with multiple agents, often with conflicting objectives. This chapter surveys the applications of game theory to supply chain analysis and outlines game-theoretic concepts that have potential for future application. We discuss both noncooperative and cooperative game theory in static and dynamic settings. Careful attention is given to techniques for demonstrating the existence and uniqueness of equilibrium in noncooperative games. A newsvendor game is employed throughout to demonstrate the application of various tools.

Mean-Variance Analysis for Optimal Operation and Supply Chain Coordination in a Green Supply Chain

“…The leader of the decisionmaking determines the optimal strategy so as to maximize the leader's (expected) profit. The follower(s) of the decision-making determine(s) the optimal strategy so as to maximize the follower(s)'s (expected) profit under the optimal strategy determined by the leader of the decisionmaking (Cachon and Netessine, 2004;Nagarajan and Sosic, 2008;Esmaeili and Zeephongsekul, 2010;Berr, 2011;Hu et al, 2011;Mukhopadhyay et al, 2011;Aust and Buscher, 2012). However, considering the aspect of the total optimization of a GSC, it is desirable to shift to the optimal operation in IGSC from that in DGSC.…”

Impact of Information Sharing Regarding Customer Returns Ratio on Optimal Sales Strategy under E-commerce

“…The leader of the decision-making determines the optimal strategy so as to maximize the leader's (expected) profit. The follower(s) of the decision-making determine(s) the optimal strategy so as to maximize the follower(s)'s (expected) profit under the optimal strategy determined by the leader of the decision-making (Aust and Buscher, 2012;Berr, 2011;Cachon and Netessine, 2004;Cai et al, 2009;Hu et al). Also, in a supply chain management, the optimal decisions under an integrated supply chain maximizing the whole supply chain's expected profit can bring the more expected profit to the whole supply chain than those under a decentralized supply chain maximizing the expected profit of each member in a supply chain.…”

“…In this case, it is the absolute requirement for all members under the integrated supply chain to obtain the more expected profits than those under the decentralized supply chain. In order to achieve the increases in profits of all members under the integrated supply chain, a variety of supply chain coordination approaches between all members have been discussed by Cachon and Netessine (2004), Chauhan and Proth (2005), Nagarajan and Sosic (2008), Du et al (2011).…”

Analyzing the Evolutionary Stability for Behavior Strategies in Reverse Supply Chain

“…The leader of the decision-making determines the optimal strategy so as to maximize the leader's (expected) profit. The follower(s) of the decision-making determine(s) the optimal strategy so as to maximize the follower(s)'s (expected) profit under the optimal strategy determined by the leader of the decision-making (Aust and Buscher, 2012;Berr, 2011;Cachon and Netessine, 2004;Cai et al, 2009;Esmaeili and Zeephongsekul, 2010;Hu et al, 2011;Lee et al, 2011;Leng and Parlar, 2009;Liu et al, 2012;Mukhopadhyay et al, 2011;Xu et al, 2012;Yan and Sun, 2012).…”

“…However, note that it is the absolute requirement for all members under an integrated supply chain to bring the more expected profits to all of them than those under a decentralized supply chain. For the purposed of achievement of the increases in profits of all members under an integrated supply chain, a variety of supply chain coordination approaches between all members in a supply chain have been discussed by Cachon and Netessine (2004), Du et al (2011), Kaya (2010, Tsay et al (1999), Wei et al (2012), Wu (2012), Yan and Sun (2012), and Yano and Gilbert (2004).…”