Dynamic Competitive Newsvendors with Service-Sensitive Demands

Abstract

When two firms compete for service-sensitive demands based on their product availability, their actions will affect the future market share reallocation. This problem was first studied by Hall and Porteus (2000) using a dynamic game model. We extend their work by incorporating a general demand model, which enables us to obtain properties that reveal the dynamics of the game and the behavior of the players. In particular, we provide conditions under which the market share of a firm has a positive value and give it an upper bound. We further extend the game competition model to an infinite-horizon setting. We prove that there exists a stationary equilibrium policy and that the dynamic equilibrium policy always converges to a stationary equilibrium policy. We demonstrate that demand patterns will dictate how firms compete rationally and show the likely outcomes of the competition.service-sensitive demand, availability competition, demand model, dynamic game, feedback Nash equilibrium, stationary policy, order quantity structure

Dynamic Capacity Allocation to Customers Who Remember Past Service

“…The authors consider joint advertising and periodic review inventory management given these dynamics. Hall and Porteus (2000) and Liu et al (2007) assume a finite pool of homogenous customers where customers may defect to a competitor upon experiencing poor service in the current period. They characterize a dynamic equilibrium among competing suppliers' capacity choices.…”

Inventory Management Under Market Size Dynamics

“…This duopoly model is a direct extension of the works of Hall and Porteus (2000) and Liu et al (2007) to a nonperishable inventory setting. Those works study systems where duopolists compete by 2 The potential shortcoming of this interpretation is that the firm should therefore choose an extremely high price; however, eventually nearly all customers will react against an extraordinarily high price.…”

“…1805-1821INFORMS 1807 installing capacity in every period but where any service failures result in market diminution. Liu et al (2007) extend Hall and Porteus' (2000) analysis with a more general demand function that we have also adopted in our models. The multiperiod nature of those models, with market reductions in a competitive framework, makes their work similar to ours.…”

Ποσοτική Ανάλυση Της Επίδρασης Της Έλλειψης Προϊόντων Στη Διαχείριση Αποθεμάτων

“…When consumers experience positive or negative service encounters, they update their expectations about future encounters. Liu et al (2007) also extend the work of Hall and Porteus (2000) by incorporating a more general demand model. In all three papers, however, it is assumed that there is no inventory carryover or backorder from period to period.…”

“…The only exceptions are Gans (2002), Hall and Porteus (2000), Gaur and Park (2006), and Liu et al (2007).…”