Coordinating Investment, Production, and Subcontracting

Murthy, Sesh; Akkiraju, Rama; Goodwin, Richard; Keskinocak, Pınar; Rachlin, John; Wu, Frederick C. W.; Yeh, James K.; Fuhrer, Robert M.; Kumaran, Santhosh; Aggarwal, Alok; Sturzenbecker, Martin C.; Jayaraman, Ranga; Daigle, Robert; Mieghem, Jan A. Van

doi:10.1287/mnsc.45.7.954

Cited by 302 publications

(124 citation statements)

References 11 publications

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“…Given that the slope of each best response function is less than one everywhere, if they cross at one point then they cannot cross at an additional point. A contraction mapping argument in this form was used by Van Mieghem [97] and by Rudi et al [81].…”

Section: Tutorials In Operations Research C 2006 Informsmentioning

confidence: 99%

Game Theory in Supply Chain Analysis

Cachon¹,

Netessine²

2006

Models, Methods, and Applications for Innovative Decision Making

166

168

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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.

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Section: Tutorials In Operations Research C 2006 Informsmentioning

confidence: 99%

Game Theory in Supply Chain Analysis

Cachon¹,

Netessine²

2006

Models, Methods, and Applications for Innovative Decision Making

166

168

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“…While outsourcing externalizes some internal operations, subcontracting allows manufacturers to carry out jobs both internally and externally (Van Mieghem 1999). In this manner, subcontracting enables a manufacturer to speed up the completion times of his jobs.…”

Section: Introductionmentioning

confidence: 99%

Decentralized subcontractor scheduling with divisible jobs

Hezarkhani

Kubiak

2015

J Sched

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Subcontracting allows manufacturer agents to reduce completion times of their jobs and thus obtain savings. This paper addresses the coordination of decentralized scheduling systems with a single subcontractor and several agents having divisible jobs. Assuming complete information, we design parametric pricing schemes that strongly coordinate this decentralized system, i.e., the agents' choices of subcontracting intervals always result in efficient schedules. The subcontractor's revenue under the pricing schemes depends on a single parameter which can be chosen to make the revenue as close to the total savings as required. Also, we give a lower bound on the subcontractor's revenue for any coordinating pricing scheme. Allowing private information about processing times, we prove that the pivotal mechanism is coordinating, i.e., agents are better off by reporting their true processing times, and by participating in the subcontracting. We show that the subcontractor's maximum revenue with any coordinating mechanism under private information equals the lower bound of that with coordinating pricing schemes under complete information. Finally, we address the asymmetric case where agents obtain savings at different rates per unit reduction in completion times. We show that coordinating pricing schemes do not always exist in this case.

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“…One possible way for both firms to agree on exchanging capacity (as in a centralized system) and splitting the capacity exchange surplus is through negotiation before capacity investment decisions are made. As in Van Mieghem [23], θ i can be regarded as the "bargaining power" of firm i; the higher the value of θ i , the greater power firm i has in negotiation. Note that since capacity exchange is conducted before demand uncertainty is resolved, the split of the surplus will be in terms of "expectation".…”

Section: Capacity Investment Decisionsmentioning

confidence: 99%

Lateral capacity exchange and its impact on capacity investment decisions

Chakravarty

Zhang

2007

Naval Research Logistics

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Abstract:We study the problem of capacity exchange between two firms in anticipation of the mismatch between demand and capacity, and its impact on firm's capacity investment decisions. For given capacity investment levels of the two firms, we demonstrate how capacity price may be determined and how much capacity should be exchanged when either manufacturer acts as a Stackelberg leader in the capacity exchange game. By benchmarking against the centralized system, we show that a side payment may be used to coordinate the capacity exchange decisions. We then study the firms' capacity investment decisions using a biform game framework in which capacity investment decisions are made individually and exchange decisions are made as in a centralized system. We demonstrate the existence and uniqueness of the Nash equilibrium capacity investment levels and study the impact of firms' share of the capacity exchange surplus on their capacity investment levels.

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Coordinating Investment, Production, and Subcontracting

Cited by 302 publications

References 11 publications

Game Theory in Supply Chain Analysis

Game Theory in Supply Chain Analysis

Decentralized subcontractor scheduling with divisible jobs

Lateral capacity exchange and its impact on capacity investment decisions

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