A Model for Partial Product Complementarity and Strategic Production Decisions under Demand Uncertainty

作者：Fang Xiang^*; Wang Yunzeng

来源：Production and Operations Management, 2010, 19(3): 322-342.

DOI：10.3401/poms.1080.01094

• supply chain management
• complementary products
• production decisions
• uncooperative game theory
• multivariate stochastic demands

This paper considers a general industrial setting where multiple manufacturers each produce a different product and sell it to the markets. These products are partially complementary in the sense that there is a common demand stream that requests all these products as complementary sets and there are streams of individual demands each requesting only one of the products. All demands are uncertain and may follow any general, joint distributions. Facing demand uncertainties, the manufacturers each choose a production quantity for its product with an objective to maximize its own expected profit. We formulate the problem as a non-cooperative game to study the strategic interactions of such firms and their implications to supply chain performance. We show that such a game may have numerous equilibria. Among all the possible equilibria, however, we prove that there always exists a unique one that maximizes each and every manufacturer's profit, and we derive an explicit solution for this Pareto-optimal equilibrium point. We further study the optimal solution for a centralized system and compare it with the decentralized solution. Managerial insights are drawn as to how system parameters and control mechanisms affect firms' decisions and performance.

• 出版日期2010-6